April 20, 2025 • 38 mins
Justin Worsham kicks off the show diving into a new Zillow policy that’s ignited a turf war among realtors. He breaks down the pros and cons of fixer-uppers vs. move-in-ready homes and what your choice says about your lifestyle. Plus, Justin unpacks a proposed California rent control bill that could slash annual caps and end exemptions for single-family homes and explores how property management might be the secret weapon to surviving the housing cost crunch.
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Episode Transcript
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Speaker 1 (00:00):
You're listening to KFI AM six forty on demand.
Speaker 2 (00:04):
This is justin Warshaw and back yet again two to
four today talking Southern California real estate.
Speaker 3 (00:09):
So far, you got one more week.
Speaker 2 (00:11):
I'm gonna be back again next Sunday, and then I
guess the powers a Bee will decide if this is
worth doing or not. Moving forward, we'll find out if
you guys have questions. In my experience so far, just
the two weeks before doing today, I really like when
you guys use that talkback feature and send me something
like a question. We've had great questions about like manufactured homes.
(00:33):
We've had great questions about repurposing commercial listings, negotiating tactics.
So that little microphone on the iHeartRadio app in the
top right corner, you hit that and it lets you
send a little voice memo to us and send us
a question if you have one. What I want to
start off talking today was an interesting headline that was
set to me where it says that Zillo declares all
(00:55):
out war on real estate listings and it's very catching.
So what Zilo did was they said that if you
are a real estate brokerage, which now Zilo is As
of twenty twenty, Zilo changed from being a marketing website
to a real estate brokerage. What that means is, before
twenty twenty, that was a place that you would go
(01:16):
just to see homes advertised. Other examples would be homes
dot com, realtor dot com. Those are probably the two
most popular that are just marketing. When Zilo decided to
become a brokerage, that meant that they were going to
hire agents and they would be involved in the transaction process.
And the reason that part is relevant is because they
(01:38):
get information from a multiple listing service or MLS as
realtors call it. The MLS is what your realtor uses
to put a house for sale on the market where
other realtors can see it. Now, there are other jobs
that can get access to the MLS, like appraisers and
all that stuff. It's not necessarily like strictly exclusive, but
it is how we share information as realtors about listings.
(02:00):
It's also where what we use to gather data, and
appraisers use it to gather data on getting values to
do comparable market analysis or get comps as they're called
in short, on homes. So now that you kind of
have an understanding of what the MLS does. One of
the options that we have at like I have it
for my entire office. I'm a licensed real estate broker,
and I could set this for all of the agents
(02:21):
that work underneath me that whenever we post a listing
for my office, it does not get pushed out to
marketing sites. What I don't have control over is getting
pushed out to brokerages. So before twenty twenty, I could
have said I don't want any of my listings from
the MLS to get pushed out to Zilo dot com,
to Realtor dot com, to homes dot com. I could
(02:42):
turn that part off, But honestly, there's no real reason
for me to do that that I can think of,
because as a broker, I believe that the more eyes
you can get on a property, the better for your client.
You want everybody to know that that house is on
the market. But there are these growing brokerage and this
is going to sound like I'm throwing shade at him
(03:03):
to try to sound more cool than I am, but
I'm not. There are large companies out there. Compass is
probably the biggest player right now. Keller Williams is probably
one you know, Remax is one, you know Cold World Banker.
There's a ton of these big brokerages and they have
been kind of trying to find ways of only being
able to show listings exclusively to their clients and from
(03:25):
the outside.
Speaker 3 (03:25):
And I would tend to agree with with this.
Speaker 2 (03:28):
I don't know that I can think of another way
or another benefit from the outside. It means that they
just want all of the commissions to stay within their
own shop. They don't want to share those commissions. So
what that would mean is if Compass only shared the
listings that Compass agents have with other Compass agents, then
me and my clients wouldn't even know that house is
(03:48):
for sale. There's no way for me to know, and
that's not good for the customer. Again, the more people
that know that a house is for sale, it's just better.
I don't see how that benefits anybody but Compass. And
if somebody higher up at Compass wants to disagree with me,
please let me know.
Speaker 3 (04:06):
Now here's what I think happens. Though.
Speaker 2 (04:09):
There is such a thing as like if I'm listing
I haven't had the fortune to do it yet, but
let's say I'm listing a fifteen million dollar house or
even more, there's there's a lot of like, we don't
need to put that on the MLS because then it
goes to everybody. I can't control who it goes to,
and there's a very small section of the public that
can afford to buy a fifteen million dollar home or
(04:29):
more like, I've seen houses listed here in southern California
for like one hundred and thirty million and it's just
a residential house that looks like a hotel. Now, for that,
I absolutely agree there is no reason that you need
to market that to the general public because chances are
you're gonna get a couple of yahoos who just want
to come by and see what one hundred and thirty
million dollar house looks like. And honestly, in most cases,
(04:52):
for anybody who doesn't know this, like usually when you
get north of about four to five million dollars, a
listing agent will ask for proof of fun or a
pre approval that before you can even see the house.
Speaker 3 (05:03):
And I agree with that. That's where I'll.
Speaker 2 (05:05):
Completely eat my own words and say not everybody needs
to know and see a fifteen million dollar house. That
should only be for people who qualify. But when you're
talking about around the median house price. Orange County's one
point four million. In La County, it's in the mid
nine hundreds right now. So if you're somewhere in that
one to two million dollar range, the more eyes that
are on it, the better. It's just better for everybody
(05:27):
to see it. So when you get these organizations like
a Compass who are saying that they want to just
be able to share their listings with their clients, which
by the way, there is nothing that stops them from
doing that.
Speaker 3 (05:39):
They just need to in order to do it right.
Speaker 2 (05:41):
They should make sure that their clients are aware that
they are not publicly marketing the property on the MLS.
Speaker 3 (05:47):
That's about all that they should do.
Speaker 2 (05:48):
But there's nothing legally against them doing that as long
as they make sure that their clients are aware. So
what Zillow came out and said was that if you
preclude your listing from the MLS for say a couple weeks, right,
you don't let everybody know that this house is for sale.
So you try for a couple weeks to see if
you can find a buyer inside your own brokerage, from
(06:09):
another agent that has a client or whatever, to try
to do what they call double ending the deal or
dual agency. It's the same broker representing buyer and seller.
Then we are going to blackball you're listing and it
will not show up on Zillo. We're not going to
put it up there. And why is this a big deal?
Because Zillo currently has the largest market share for real
estate searches at forty four percent. Second place is realtor
(06:32):
dot Com with only nine percent of the markets. That's
a big lead. So large brokerages they want to keep
it exclusive they can make some money. Zillo wants to
make sure that everybody gets to see it because also
they don't want to lose their power. They don't want
to lose the fact that everybody goes to Zilo to
look for websites or look for houses right now, they
do it late at night. Here's another fun fact. The
(06:55):
Redfin CEO Glenn Kellman came out and said that he
doesn't want price reduction or days on the market to
be pushed out to these marketing sites. And if you're
asking your sold well, why would he care? It's because
that's the usual. That's usually the biggest predictor that a
realtor will use to say that a house is overpriced
is if it's been sitting right now, the median days
(07:16):
on the market is about twenty eight to thirty somewhere
in there, right. So again, if the house is if
it's a fifteen million dollar house, the days on the
market is going to be significantly longer. You're probably looking
at like six to eight months, just because the number
of people that can qualify to buy that home is
much smaller, so it's going to take longer to find
the right person. But if you're listing your house for
(07:37):
somewhere between a million and one point four million, then
you should be exposed out there. Everybody should see it.
And if you've seen your house the house is listed
and it's been on the market for four months then
and they've done a couple price reductions, then that's usually
a telltale sign the house is overpriced and it's time
to try to negotiate for something below list And so
(07:57):
you the buyer kind of get leverage in that situation.
So Redfinn CEO says, I don't even want that out there,
which again I don't agree with. I think the more
information that people have the better, Like they should all
have access to the information. The biggest thing that I
don't like is there's always some kind of like editorial
aspect to this. When I see articles like this that
(08:19):
they always make it seem like realtors want more money.
And I know that I said that about these big brokerages,
but remember what I said was, I can't see another
reason just because I'm a realtor, and I end up
I actually prefer not to do this, not to make
myself sound like I'm some hero or something, but I
don't like the double end deals. I always try to
(08:40):
find another agent that I could refer a buyer if
they come unrepresented, because that way that person could fight
for the buyer and I could fight for my seller.
I'm not in the middle of that. There's lots of
agents who disagree with me about that, and I'm not
here to argue that. I'm just saying that I can't
see a reason why. And I hate it when people
think and treat realtors like they are only in it
for the money, that they are entirely motivated by the money.
(09:03):
I'm not saying they don't exist. I'm just saying that
I don't think that they're the largest percentage of the
population of realtors. The realtors that I know, they're very philanthropic.
They get involved in a lot of community outreach and
because they want a network, yes with potential clients, but
also it keeps them informed on what's going on in
their committee. They donate to schools, they donate their time,
they donate to nonprofits, and so because that's part of
(09:26):
their job. As part of our job as a realtor
is to be aware of the communities that we live in,
be aware of property rights and protect them, and do
that for the public at large. So we're heroes, is
my point. Okay, when we come back, I want to
talk about should you buy a fixer and update it
or should you buy a house that is already updated.
It's a question I get a lot when I'm working
(09:48):
with buyers or at open houses.
Speaker 3 (09:49):
We'll talk about that later.
Speaker 1 (09:51):
You're listening to KFI AM six forty on demand.
Speaker 2 (09:55):
I'm justin worship here with you again talking Southern California
real estate until four o'clock. I'll be back again next
week two to four, and then we will see what
happens from there. Whenever I'm out with clients, and because
affordability is such a huge issue. I'm probably going to
beat that dead horse the whole time they let me
talk about its. Southern California real estate is just it's
(10:16):
so crazy expensive.
Speaker 3 (10:18):
It is so hard for people to.
Speaker 2 (10:19):
Find a house that they can own and live in
in Southern California. So everybody always is trying to figure
out what's the best way, what's the best way. Most
of my clients want something that's more updated. They don't
necessarily like what I call the Ikia wet dream that
a lot of people who renovate houses or flip them
to their it's prefab shaker style cabinets, very neutral like
(10:42):
Swiss coffee white throughout the house, some kind of like lightwood,
engineered or engineered wood, or vinyl luxury vinyl they like
to call it VLP flooring throughout and it feels very
sterile some of them. Most of them kind of like
the more like something that's maybe close to ten years
old and that that feels like a home.
Speaker 3 (11:01):
Still.
Speaker 2 (11:01):
They don't want something that's completely tricked out and updated
and new, But they all want to know what's the
best buy, Like does it make more sense? So financially,
I would argue that it makes the most sense to
buy a house that is a fixer, that is what
they call distressed or needs some updates for two reasons. One,
you get to make it the way you like it.
(11:23):
You get to pick all the finishes. So very rarely
are you paying a premium for all those updates only
to have them changed.
Speaker 3 (11:29):
This seaking witch.
Speaker 2 (11:30):
I'm sorry that I always interrupt my thoughts, but I
always find this as fascinating. There was this house. A
builder that I know built a huge house. It's up
in hidden hills and it was a huge house with
two guest house on it. Fifteen million dollars. Somebody paid
all cash, immediately bulldozed the two guesthouses and then gutted
the main house after paying fifteen million dollars cash for
(11:52):
it to make it the way they wanted it. And
everything was brand new construction by the way, anyway, So
what people want to do, You get to make it
the way you want it, right, You pick all the finishes,
and the money you put into it is becomes your equity.
Speaker 3 (12:06):
Right.
Speaker 2 (12:06):
There's a formula that we have, but there's no real
way to test this formula because in order for it
to be really accurate, you would have to compare two
exact homes without having any influence on it. So what
I'm saying is that there's a formula that says if
you put whatever you put into the house, you're gonna
get one and a half times that money back. So
let's say you put one hundred thousand dollars into renovations
(12:27):
into a home. You have now increased your home by
one hundred thousand dollars, so you get your money back,
and fifty thousand dollars more. So that's the money you
made from putting in new kitchens, new bathrooms. That's where
you're going to get the most bang for your Bucket's
number one the kitchen when you update a kitchen, and
then number two the bathrooms.
Speaker 3 (12:45):
And just to give you an idea too, what it costs.
Speaker 2 (12:47):
I tell people that if you're renovating a kitchen, a
fair ballpark figure is about forty to sixty thousand dollars. Now, again,
the nicer the finishes, the nicer the bells and whistles
you get, that obviously could go up. This is just
kind of average. And then a bathroom is about fifteen
to twenty thousand dollars to renovate it. So you get
that one and a half times back. But here's the
(13:07):
thing that I can't put a price on, and that
is all of the stress of construction, because almost across
the board, everybody who is thinking or considering doing this,
they're not in construction right Because if you are a contractor,
you already know and that's your plan to begin with.
You of the guys, you have the resources, you know
(13:28):
everything that you need, and you know how to do it.
But the people who are considering doing this are they
don't have any background in that and very rarely, because
it's so expensive to live or pay rent in southern California,
very rarely could people afford to carry their mortgage and
pay rent. So their plan is to live in the
house while it's being worked on. And that's a I
(13:50):
don't know, that's a surefire away to just destroy.
Speaker 3 (13:53):
A family my opinion.
Speaker 2 (13:55):
I'm laughing because I have an unpermitted one bedroom unit
on the back into my garage at my house, and
I was planning to add on to my house and
I was so smart. Guys, this is really why you
should listen to me. My plan was to take my
family of four and move them into this one bedroom
space that didn't really have a bedroom. It was just
(14:17):
a living area that we would all have to hang
out in and sleep in, like we were all glamping
in our backyard while they worked on the house. And
the average construction for something like a major renovation where
you're gutting a house and everything, you should at least
expect four to six months of construction. And that's if
you're not like adding square footage, you're not blowing out
a back wall and pushing out into.
Speaker 4 (14:38):
The back of your brother did that, and a good
friend of mine from high school, they did that when
they bought their properties. They one was in a track
home and then the other was just like an empty lot. Yeah,
and both times they ended up staying a little longer
in the trailers they than they had anticipated. In the
event of my brother though family of five.
Speaker 2 (14:56):
Yeah, yeah, then it didn't go well, I take it right,
like that was really how long were they in there?
Speaker 4 (15:02):
My god, it was a few months, and so they
ended up moving into the mom's house temporarily because two
months turned into three months. Yeah, you know, because stuff happened.
Speaker 2 (15:12):
My sister did that while they were building a guest
house with her new boyfriend, and she was staying in
a trailer and she did that for five months and
she was like, ugh, she was miserable, and it was just.
Speaker 3 (15:20):
Her and her boyfriend because her kids are all grown up.
Speaker 2 (15:22):
But yeah, so you gotta think about that.
Speaker 3 (15:25):
And I don't recommend it.
Speaker 2 (15:26):
So my recommendation would be that if you're planning to
do a major renovation after you purchase a house, build
into your budget getting a rental for a year. You
could try to get a six month lease on something.
But and they might be more popular now because I
think there's a lot of rental property owners out there
that are willing to be flexible on that because they're
planning on marketing it to people who are rebuilding from
(15:46):
the fires. So you might be able to find some
not short term lease. Short term lease is like less
than three a month. What we're talking about is anywhere
from three to six months less than a year, right,
So definitely build that into your plan. But the other
thing you got to think about, and I looked into this,
and this is I looked into this about the same
time I was thinking about adding onto my house. And
(16:06):
the data has not pivoted in the slightest seventy four
percent of people who do a home renovation regret it.
Now they're always happy with the product, but like they
regret the when they're in it, they always regret it.
Speaker 3 (16:18):
They always hate it.
Speaker 2 (16:19):
I don't know anybody who's ever renovated the house, even
people who do it for a living, Like I flipped houses,
and most of the time I flip houses. Even when
I feel like I'm making money, I still regret it.
It's still I just like, why did I sign up
for this? What was I thinking? Why did I do this?
This was a bad idea. Ninety two percent it positively
impacted their lives, because that's what happens after you get
(16:40):
through the misery. You're so happy with the house, so
there is that light at the end of the tunnel.
But here's the bigger one eighty percent go over budget.
So I always tell clients if you're planning a renovation
project when you buy a home, at least add ten
ten percent.
Speaker 3 (16:55):
To whatever you build, whatever, all.
Speaker 2 (16:57):
The invoices, the contractors and everything, at least throw ten percent.
If you really want to be safe, throw twenty percent
on top of that plan so you have some cushion.
Because there's always something that goes wrong. The other thing
people forget is permits and how long it takes to
get permits. Now, LADWDBS is pretty quick depending on what
you're doing. But the annoying part about dealing with these
(17:18):
planning planners at the city level is that you could
talk to one person one day and come back to
another person another day if that your person who's assigned
to your permits isn't there, and they could give you
an entirely different answer.
Speaker 3 (17:31):
Home inspectors as well are notorious.
Speaker 2 (17:33):
And I'm not talking about home inspectors when you buy,
the inspectors that come and inspect the construction that's being done.
I flipped the house and a guy came out and said,
you need to have an enclosure on the shower And
I said, what do you mean, like a shower curtain
or does it have to be a glass wall? And
all he would tell me is like it has to
have an enclosure. Like he just sat there and stared
at me and said, you need an enclosure. So I
rent out real quick, got twelve hundred dollars for a
glass enclosure on a shower door. They came back to
(17:54):
reinspect for the final sign off. He didn't even look
at the bathroom. He went into the microwave above, saw
that it wasn't a rigid or solid line to vent
out the fan above the stove, and he said, you
got to fix that, and then walked out.
Speaker 3 (18:05):
And that was all they did.
Speaker 2 (18:06):
So there's gonna be some pain, there's gonna be a
lot of heartache, and it's not gonna work out. The
other hard part is having enough cash on hand. A
lot of people think they could just borrow against the house,
but if you've already put twenty percent down, you don't
have room to borrow more money on your house. And
if you try to get a construction loan with not
having a ton of equity already in it, it's very
risky for lenders.
Speaker 3 (18:25):
Good luck finding somebody who will lend you that cash.
Speaker 2 (18:28):
All right, when we come back, I want to talk
about a rent control bill that is currently on the
Assembly floor that is gonna modify wants to modify the
current rent control bill, and why I think rent control
is a horrible thing.
Speaker 1 (18:40):
You're listening to KFI AM six forty on demand.
Speaker 2 (18:43):
This is justin worship talking Southern California real estate. Coming
up in the next hour I'm gonna have a state
planning attorney, Britney Britton from Best Coast Laws. She helped
me with my trust because if you own a home
in California in particular, you need to have it in
a trust, and you need to have a trust. And
we'll explain why you need that coming up at two
o'clock when we kick off the show after that, But
(19:06):
right now, I'm talking about rent control. So right now,
we have Assembly Bill fourteen eighty two, which I think
came out in like twenty twenty, and it currently sets
a cap of rent increases annually at five percent plus CPI,
which is cost of living increase.
Speaker 3 (19:22):
Right.
Speaker 2 (19:23):
Consumer price index is what CPI stands for, but it's
basically regular inflation, right.
Speaker 3 (19:28):
And then it also has a cap ten percent.
Speaker 2 (19:30):
Now, fun fact, La County already has a built in
ten percent cap because of the wildfire risk. Orange County
does not, but they currently do because of the fires.
So the state law supersedes all of that and says,
right now there is this emergency order in place that
says you can't raise rents more than ten percent, even
in Orange County because of the fires. They don't want
people gouging people with the rent. And this is where
(19:54):
I'm going to say this first before I start to
break this down. When I give you my take on this,
it's going to sound like I hate people who are
tenants and renters and I think that they're horrible people
and all of that stuff. And if that's the way
I come across, that's just poor word choice. That's not
my intent here. My intent is really that I think
(20:14):
when you talk about rent control, there's a realtor that
I know, Harrioti murri and who I think coined this phrase,
at least for me, And what he said is that
rent control is a forced subsidization of housing on the
people who own the home. So it's forcing people to
provide a government subsidy for their housing instead of letting
them take advantage of the property that they own and
(20:35):
use it. A lot of people use rental property as
a retirement income. And so when you start putting caps
and limits and regulating how they can charge for that,
and you're not allowing for accurate representations, because think about it,
we had what was it like, the thirty percent upwards
during the pandemic inflation, and that's not counting when people
weren't allowed, weren't required to pay rent, they could get
(20:56):
away from paying rent, and they allow people to stop
paying rent before they worked out any plan for rental
property owners to keep up with their mortgage payments or
any of that stuff. So they just immediately default to letting.
A rental property owner, in my opinion, get hosed to
benefit a tenant. And I just don't see that there
are large corporations representing the mass majority of people. And
if that is the case, then I'm wrong on those numbers.
(21:17):
Then who is severely not being considered in these situations
are senior citizens who use this as retirement income and
that's how they sustain themselves. But anyway, let me go
back to my original plans to explain what fourteen eighty two,
so it sets that cap. There's a ten percent cap
right now because the fires Forrange County, LA County. Now,
once a tenant has lived in a unit for a year,
(21:38):
they cannot be asked to vacate without just cause. So
they had this clause in fourteen eighty two. That's called
a no fault eviction. So before this you could just say, hey,
mister and missus tenant, I want to have my place
back to do whatever I want with it. Here's a
sixty day notice because you've been there for a year,
please vacate at the end of this sixty days And
(21:59):
everybody was now and then LA has some like they've
added some stuff in there where there's relocation fees that
have to be accounted for, and it is so complicated
that I can't even break it down on this show,
Like you really need to sit down with a lawyer
who specializes in this stuff because it also changes very regularly,
and because you got between the county and the cities
(22:19):
and then the state as well, there's lots of layers
of legislation to this. So now, the way it stands though,
is that you can only ask them to vacate if
you plan for your spouse or domestic partner, your child, grandchild,
your parent or grandparent to occupy the unit.
Speaker 3 (22:36):
So I have a client right now who.
Speaker 2 (22:38):
Just reached out to me and said, Hey, I think
my kid's going to have to move into my rental property.
Speaker 3 (22:41):
What can I do?
Speaker 2 (22:42):
And I told them exactly that, I said, you just
give them a sixty day notice towards the end of
their lease and say, my kid intends to occupy the
unit and you're good to go.
Speaker 3 (22:51):
Now.
Speaker 2 (22:51):
Single family homes and condos were exempt from fourteen eighty
two unless they were owned by a corporation LLC or
real estate investment trust or RET. If you don't know
what a rate is, ore eit real estate investment trust.
I think the best way to describe it. It's like
using real estate as a hedge fund. So these people
(23:13):
they build, they build up a portfolio of real estate
properties that are rented out for investment purposes, and then
everybody puts pitches their money in, and then they all
get a.
Speaker 3 (23:23):
Cut of the profits. That's what a reed is.
Speaker 2 (23:25):
So if you were involved in that, you could not
be exempt from this rent cap increase. If the house
was built within the last fifteen years, it was exempt.
Duplexes where one of the owner lived in one of
the units, you were exempt. And if it was already
susceptible to some other kind of rent control So obviously
because La County's rent control ordinance is lower than the
(23:46):
five percent, so if your property qualifies for La Counties,
then it's susceptible to La County's rent control cap. Oh man,
do I get Oh? No, I got time? Okayo had
a panic attack there for a second thought, we got
to go anyway. So what they're talking about now is
a new Assembly bill. It's eleven fifty seven, and what
it wants to do is it wants to set the
(24:07):
rent cap at two percent plus CPI, not the five
percent we already have. It wants it to be two
percent and instead of the ten percent absolute cap, it
wants to set the cap at five percent. So no
matter what the scenario, you cannot raise rents more than
five percent. The other thing is that Assembly Bill fourteen
eighty two, the one we're currently living in. It's sunsets
(24:29):
on January twenty thirty, so it goes away. The new
one eleven fifty seven would be indefinite, no way to
end it, unless you, of course, passed another wall. So
why do I think rent control is bad? Because it
doesn't work? And I would love for somebody to hit
the talkback feature because here's what I know. What I
know is if you are living in a rent control
(24:50):
unit right now, you love it and it works great
for you. I'm sure maybe not all of you, and
I'll explain why here in a second. But if you
are trying to get into rent. It doesn't make rents
more affordable. The latest example was, I think it was
twenty nineteen, the city of Glendale up in the San
Fernando Valley. They passed not even a rent control ordinance,
but there was an element of a seven percent cap
on rent increases there. Within three years of them passing
(25:13):
that rent control ordinance, they became the fourth most expensive
place to rent, beating Los Angeles and New York City.
Speaker 3 (25:22):
It doesn't work. When you look through and you google
the data.
Speaker 2 (25:25):
What it actually shows is it's a temporary stop to
rent increases, but in the long term it makes places
more expensive.
Speaker 3 (25:31):
So you ask yourself why.
Speaker 2 (25:33):
If you've been listening to all these shows that I've
been doing the past couple of weeks, you'll realize that
I like to talk about simple supply and demand economics.
Part of one aspect of rent control is it forces
tenants to stay there because they can't find another place
that is equally affordable, so there is no rotation of
the units. I found a stat that this was between
twenty twenty and twenty twenty four, only forty percent of
(25:56):
rent controlled units in La County were actually turned over,
so that represents about two hundred and forty thousand housing
units of the six hundred thousand total under the rent
control ordinance, So people stay there and in most cases
multiple generations. Like it just gets passed on and passed
on and passed on and passed on. The other problem
that I have with rent control is that when you
(26:17):
start to regulate and limit the profitability of an investment
for the owner, you're kind of backing them into a
corner to being a slumlord. There's not a lot of
money for them to make improvements to the property or
to handle deferred maintenance because they're just trying to make
ends meet, and they're just stringing everybody along. A lot
of people that I know that live in rent control units,
(26:38):
they're frustrated by their landlords or rental property owners because
they don't do anything. And I think that, sure, yes,
there are bad landlords out there, and in my experience,
most of the bad landlords are bad because they're ignorant,
not because they are genuinely bad people. They just don't
understand why you don't want to pay for everything, and
they don't understand that the obligation is for them to
pay for everything. But if you really look into rent
(27:00):
control as a thing. All of the data says that
it has a short term fix, but then things get
worse really really fast. And I think it's because when
you get a government involved in trying to regulate pricing
on things, it just I don't know. I wish again
hit that talkback feature, let me know of tell me
I'm wrong. I would love I would love to have
my mind blown and my eyes open to this. Anyway,
(27:22):
when we come back, I'm going to talk about ways
that you could save money on housing, how could you
find a way to live.
Speaker 3 (27:29):
I'm going to give you some little hacks. When we
come back.
Speaker 1 (27:32):
You're listening to KFI AM six forty on demand.
Speaker 2 (27:35):
I'm justin Morrish from talking Southern California at real Estate
with you. Coming up at the top of the hour,
we are going to have a state planning attorney, Britney
Britton from Best Coast Law. She's going to be talking trusts.
If you own a home and anywhere in California, actually
you should have a trust, and I'll explain why and
all of the benefits with the help of Britney coming up.
If you have questions about a trust, use that talkback feature.
(27:57):
And send it my way. I want to talk about
saving money on housing because again, it comes up all
the time when I'm working with clients, and I think
this is probably going to be more targeted to younger
people coming to Southern California and either trying to build
a life for themselves. A lot of people come here
for the industry, I think, and other stuff. I'm sure too,
but most of the clients I come across, they're here
(28:19):
for the industry and they need to find a way
to minimize their expenses. The one that is probably least applicable,
or probably something that people are like, eh, I don't
know if I like that unless you're in your twenties
is house hacking. And if you're not familiar with this term,
it's where you buy a place with the intent of
renting out rooms within the house. So the problem with
(28:42):
that is that you have to be somebody who is
of a certain age that you have enough money, but
maybe you have a family who's willing to help you
buy a place and they're helping you with the down payment. Now,
so you go in, you buy the place, and then
you rent out the other rooms. But the key is
you have to be able to qualify for the mortgage
without a rental income. That's another mistake I get with
(29:02):
a lot of clients as they think that they could say, well,
I'm going to buy this house, but I know I
can rent each of those bedrooms out for a thousand
dollars a month, So can that be part of the
equation when you're doing the math for me to get
a home loan, and it just does not work that way.
So that only really applies if you can afford to
buy like a town home or a condo, but you're
not really comfortable with the payment. Because I've had clients
(29:24):
who can afford or qualify for up to a million
dollar purchase or more, but then when they see that payment,
they're like, Nope, don't want to pay that, regardless of
what they can actually qualify for, right like it doesn't matter,
Like I don't care that I can technically on paper
afford that. I don't want to pay that each month.
That scares a living crap out of me. So they
(29:44):
will oftentimes buy obviously a less expensive home. Now when
you should not do, what you should not do in
house hacking is try to buy a house with a friend, right,
don't go in as a quote unquote.
Speaker 3 (29:58):
Partner and like we're gonna split it cross this house.
Speaker 2 (30:00):
And that's I mean, I don't know, you got to
really know this person well, but I just feel like
that's a big recipe for problems. And the reason I
say this actually is because I had somebody reach out
to me who would listen to the show. And they're
going through, now this is years down the road. They're
going through a title fight, not really a fight. Maybe
that's not the right word. I apologize for using the
(30:20):
poor word if you're still listening to the show, but.
Speaker 3 (30:23):
They're right now.
Speaker 2 (30:24):
Their mom is the one who bought this duplex, and
they bought it with another family. So they the two
families came together and they bought this duplex. One lived
in one, the other lived in the other. But then
eventually they moved out and they rented it. But they
share this property. But they're not married, right, They're not
a couple. It's two separate, independent families. And now those
people are of an age where they're at the end
(30:45):
of their time. And so now these kids who have
no relation or no connection to this other family are
now going to be forced to work with this family
somebody's got to figure out a way to buy somebody
else out. And when it's a rental property, this I
think happened to be down at San Diego, but if
it's a rental property up here in La County, and
it could be hard to relocate a tenant in that situation.
I've also helped people try to sell a lot of
(31:07):
land that they bought with another family, and that was
a whole set of problems because the two families disagreed
on who they should hire as a realtor, or how
much they should be able to pay and commission what
they should list it for. There's all these opportunities for disagreement.
The other thing is, and this I actually stole from
my wife when she was doing home loans, is that
I don't recommend anybody buy a home with a boyfriend
(31:28):
or a girlfriend. If you can't qualify to buy that
house on your own and you were not interested in
putting a ring on it, then it's probably not a
good idea to go purchase a home with that person.
Wait until you've you've gotten comfortable enough to get married. Now,
the other thing I want to share with you as
a way to save money on housing is what I did.
This is how I saved up for my house, and
(31:49):
I think it's a very underrated way to deal with
high cost of living, especially if you're a young person.
Property management. So in the state of California, if the
the apartment building has sixteen units or more, they are
required by law to have an on site manager. Somebody
there has to be the designated manager. Now, the assumption
(32:11):
that people make is that if you're going to be
an on site property manager is that you have to
understand plumbing and electrical and you have to be able
to fix stuff. But in my experience, most of the time,
especially if you're working for a property management company, they
don't want you to do that. Because I have a
rental property in North Carolina that's handled by a property
management company and she prefers that I use her vendors
(32:33):
because she marks it up a little bit, much like
a general contractor usually marks up about twenty thirty percent.
So whatever bid they're getting, so they have a painter,
they have a plumber, they have an electrician. They gather
all that and they get their bills and that becomes
their bill, and then they add another twenty thirty percent
for themselves to basically manage the process. And that's how
they make money for placing you with all those people. Right, So,
(32:53):
same kind of thing. They want you to use their
plumbers because they charge a premium to the rental property owner.
They don't need you to even and understand how to
do that. They just need you to be there and
the field the phone calls and handle the information and
do what is best for the tenants. So you don't
need to worry about that. You don't even need to
be a real estate professional. I actually got my real
estate license after becoming a property manager.
Speaker 3 (33:15):
Now here's what I'll tell you.
Speaker 2 (33:16):
The people that have become property managers almost across the board.
You are working for a crazy owner that you've got
to be willing to deal with that kind of you
know stress. I wouldn't call the owners that I worked
for crazy at all, but they did have in my opinion,
they had like they just didn't quite understand the value
of their units. As an example, I was pretty good
(33:39):
at I'll give you a tip in case you do
become a property manager.
Speaker 3 (33:43):
I was.
Speaker 2 (33:43):
I got to the point wherein after the first six
months of taking over that building that I managed for
almost four years. I had it one hundred percent occupied
one hundred percent of the year, and that not to
toot my own horn, but that's pretty difficult to do
because you almost always have one or two vacancies, and
I took it over with three vacant units that had
been vacant for almost a month each of them. So
when you're the owner of this apartment building, that means
(34:05):
you're not making as much money. You're not optimizing your
investment or your business in that building. So you want
a manager who's going to fill it and fill it
every day. So what I would do is that when
a tenant came to me and said, hey, I found
another place, I'm giving you my thirty day notice, I
would always say the same thing to them.
Speaker 3 (34:21):
I'd say, how soon can you move in?
Speaker 2 (34:23):
And usually everybody who knows if you've rented, usually you
end up paying at least two to three weeks of
like two rents. Right, there's always that crossover because you
can't make it time out exactly perfect. You have to
find the new place first, get them to agree to
a timeframe for the new lease, and then you have
to give notice to your existing landlord or rental property owner,
So I would say, move into the new place and
(34:44):
let me flip it, right, So that would mean putting
a new carpet, putting in, painting it, anything else that
I needed to do. I could flip an apartment in
about three to five days, so they would move out
one weekend Monday to Friday. I would have it flipped
and it would be ready to show the following weekend.
And at this time the rental market was so hot,
I could have a new tenant in place. After that
first weekend of showing the unit, I would have a
(35:04):
new lease signed. So how does everybody benefit on this? Well,
if you're the exiting tenant, right, you've already paid that
one month's rent. And now what I can do, because
you paid rent for the time that the unit was
being flipped, When I get the new rent coming in,
when you get your security deposit back, I get to
credit you back that two weeks of rent that you
(35:24):
paid for because we already have somebody else paying it.
In most cases, because markets trend upwards, especially in the
rental market, I'm making the owner more money with the
new tenant, so they're more than happy to give the
money back to the old tenant for that two week
period and there are zero days where that unit isn't
(35:45):
making money for the owner. So they loved it and
it was great for me. I managed a twenty seven
unit apartment building. I said on the show before, I
maybe spent twenty hours a week. I mean there were
some times where it was more I met twenty hours
a month. Sorry, I would maybe spend twenty hours a
month working on the building. And that would include like
I would go clean the furniture in the courtyard and
(36:06):
I would get the cobwebs out of the stairwell, like
it wasn't such a big building that we had a
cleaning service or anything like that, and then I would
there was small maintenance stuff that I would handle.
Speaker 3 (36:15):
But for the most part, it wasn't bad.
Speaker 2 (36:17):
The funniest thing that I dealt with was that I
had to we had a leak, and it was the
weekend and my wife was working and I was home
with my kids. And this is back when they were toddlers,
and we had a guy come and because our usual
plumber doesn't work on the weekend, so I think I
had to call like a rotor ruter type company.
Speaker 3 (36:34):
I don't even know if that's the right name of
the company.
Speaker 2 (36:36):
But it was like a commercial plumber that had like
tons of vans that were all painted the same color
with the same logo, not like an independent person. And
they said that it was going to be two hundred
and seventy five dollars to clear a clog and a
toilet drain, and so the owner asked me to say,
ask him if they'll do it for one hundred and
fifty and I was like, they're so, and so they
don't negotiate, and she's like, everybody negotiates. Ask him, and
(36:57):
so I asked him and the guy literally said he
goes no or so, and so we don't negotiate. And
then they're like okay, she goes, well call somebody else.
And I said, I'll tell you what I'll pay the
one hundred and seventy five dollars difference or whatever it was.
She's like, what, I go, I got two kids. It
was one hundred and fifty dollars. I go, I'll give
you one hundred and fifty dollars. And when I kind
of put that up in a mirror tour, I think
she was like, oh, yeah, you're right, I'm haggling over
one hundred and fifty dollars when the building is like
(37:19):
forty thousand dollars a month in income. Maybe that doesn't
make the most sense in the world, but it was
how I saved up. So I wasn't paying rent on
the unit, and I had like a I think it
was like a fifteen hundred square foot three bedroom, two bath.
I started in a twelve hundred square foot two bedroom,
two bath townhouse style apartment, and then when my wife
got pregnant with our second son, she let us move
(37:39):
into a three bedroom unit, so each of the kids
had their own bedroom, and it was a great gig man.
I fully intended on doing that until I could save
up for half of a home. But I just kept
paying myself the rent that I would normally be paying,
and that's how I saved up for a down payment
for my house.
Speaker 3 (37:54):
So it's a great way.
Speaker 2 (37:55):
And I was a touring comedian at the time, so
I wasn't even there all the time when I was
dealing it. Okay, Brittany Britton from Best Coast Law is
going to be talking trusts and estate planning. Do not
miss this. This is a big deal for me and
I'll tell you why when we come back. KFI AM
six forty on demand
You're listening to KFI AM six forty on demand.
Speaker 2 (00:04):
This is justin Warshaw and back yet again two to
four today talking Southern California real estate.
Speaker 3 (00:09):
So far, you got one more week.
Speaker 2 (00:11):
I'm gonna be back again next Sunday, and then I
guess the powers a Bee will decide if this is
worth doing or not. Moving forward, we'll find out if
you guys have questions. In my experience so far, just
the two weeks before doing today, I really like when
you guys use that talkback feature and send me something
like a question. We've had great questions about like manufactured homes.
(00:33):
We've had great questions about repurposing commercial listings, negotiating tactics.
So that little microphone on the iHeartRadio app in the
top right corner, you hit that and it lets you
send a little voice memo to us and send us
a question if you have one. What I want to
start off talking today was an interesting headline that was
set to me where it says that Zillo declares all
(00:55):
out war on real estate listings and it's very catching.
So what Zilo did was they said that if you
are a real estate brokerage, which now Zilo is As
of twenty twenty, Zilo changed from being a marketing website
to a real estate brokerage. What that means is, before
twenty twenty, that was a place that you would go
(01:16):
just to see homes advertised. Other examples would be homes
dot com, realtor dot com. Those are probably the two
most popular that are just marketing. When Zilo decided to
become a brokerage, that meant that they were going to
hire agents and they would be involved in the transaction process.
And the reason that part is relevant is because they
(01:38):
get information from a multiple listing service or MLS as
realtors call it. The MLS is what your realtor uses
to put a house for sale on the market where
other realtors can see it. Now, there are other jobs
that can get access to the MLS, like appraisers and
all that stuff. It's not necessarily like strictly exclusive, but
it is how we share information as realtors about listings.
(02:00):
It's also where what we use to gather data, and
appraisers use it to gather data on getting values to
do comparable market analysis or get comps as they're called
in short, on homes. So now that you kind of
have an understanding of what the MLS does. One of
the options that we have at like I have it
for my entire office. I'm a licensed real estate broker,
and I could set this for all of the agents
(02:21):
that work underneath me that whenever we post a listing
for my office, it does not get pushed out to
marketing sites. What I don't have control over is getting
pushed out to brokerages. So before twenty twenty, I could
have said I don't want any of my listings from
the MLS to get pushed out to Zilo dot com,
to Realtor dot com, to homes dot com. I could
(02:42):
turn that part off, But honestly, there's no real reason
for me to do that that I can think of,
because as a broker, I believe that the more eyes
you can get on a property, the better for your client.
You want everybody to know that that house is on
the market. But there are these growing brokerage and this
is going to sound like I'm throwing shade at him
(03:03):
to try to sound more cool than I am, but
I'm not. There are large companies out there. Compass is
probably the biggest player right now. Keller Williams is probably
one you know, Remax is one, you know Cold World Banker.
There's a ton of these big brokerages and they have
been kind of trying to find ways of only being
able to show listings exclusively to their clients and from
(03:25):
the outside.
Speaker 3 (03:25):
And I would tend to agree with with this.
Speaker 2 (03:28):
I don't know that I can think of another way
or another benefit from the outside. It means that they
just want all of the commissions to stay within their
own shop. They don't want to share those commissions. So
what that would mean is if Compass only shared the
listings that Compass agents have with other Compass agents, then
me and my clients wouldn't even know that house is
(03:48):
for sale. There's no way for me to know, and
that's not good for the customer. Again, the more people
that know that a house is for sale, it's just better.
I don't see how that benefits anybody but Compass. And
if somebody higher up at Compass wants to disagree with me,
please let me know.
Speaker 3 (04:06):
Now here's what I think happens. Though.
Speaker 2 (04:09):
There is such a thing as like if I'm listing
I haven't had the fortune to do it yet, but
let's say I'm listing a fifteen million dollar house or
even more, there's there's a lot of like, we don't
need to put that on the MLS because then it
goes to everybody. I can't control who it goes to,
and there's a very small section of the public that
can afford to buy a fifteen million dollar home or
(04:29):
more like, I've seen houses listed here in southern California
for like one hundred and thirty million and it's just
a residential house that looks like a hotel. Now, for that,
I absolutely agree there is no reason that you need
to market that to the general public because chances are
you're gonna get a couple of yahoos who just want
to come by and see what one hundred and thirty
million dollar house looks like. And honestly, in most cases,
(04:52):
for anybody who doesn't know this, like usually when you
get north of about four to five million dollars, a
listing agent will ask for proof of fun or a
pre approval that before you can even see the house.
Speaker 3 (05:03):
And I agree with that. That's where I'll.
Speaker 2 (05:05):
Completely eat my own words and say not everybody needs
to know and see a fifteen million dollar house. That
should only be for people who qualify. But when you're
talking about around the median house price. Orange County's one
point four million. In La County, it's in the mid
nine hundreds right now. So if you're somewhere in that
one to two million dollar range, the more eyes that
are on it, the better. It's just better for everybody
(05:27):
to see it. So when you get these organizations like
a Compass who are saying that they want to just
be able to share their listings with their clients, which
by the way, there is nothing that stops them from
doing that.
Speaker 3 (05:39):
They just need to in order to do it right.
Speaker 2 (05:41):
They should make sure that their clients are aware that
they are not publicly marketing the property on the MLS.
Speaker 3 (05:47):
That's about all that they should do.
Speaker 2 (05:48):
But there's nothing legally against them doing that as long
as they make sure that their clients are aware. So
what Zillow came out and said was that if you
preclude your listing from the MLS for say a couple weeks, right,
you don't let everybody know that this house is for sale.
So you try for a couple weeks to see if
you can find a buyer inside your own brokerage, from
(06:09):
another agent that has a client or whatever, to try
to do what they call double ending the deal or
dual agency. It's the same broker representing buyer and seller.
Then we are going to blackball you're listing and it
will not show up on Zillo. We're not going to
put it up there. And why is this a big deal?
Because Zillo currently has the largest market share for real
estate searches at forty four percent. Second place is realtor
(06:32):
dot Com with only nine percent of the markets. That's
a big lead. So large brokerages they want to keep
it exclusive they can make some money. Zillo wants to
make sure that everybody gets to see it because also
they don't want to lose their power. They don't want
to lose the fact that everybody goes to Zilo to
look for websites or look for houses right now, they
do it late at night. Here's another fun fact. The
(06:55):
Redfin CEO Glenn Kellman came out and said that he
doesn't want price reduction or days on the market to
be pushed out to these marketing sites. And if you're
asking your sold well, why would he care? It's because
that's the usual. That's usually the biggest predictor that a
realtor will use to say that a house is overpriced
is if it's been sitting right now, the median days
(07:16):
on the market is about twenty eight to thirty somewhere
in there, right. So again, if the house is if
it's a fifteen million dollar house, the days on the
market is going to be significantly longer. You're probably looking
at like six to eight months, just because the number
of people that can qualify to buy that home is
much smaller, so it's going to take longer to find
the right person. But if you're listing your house for
(07:37):
somewhere between a million and one point four million, then
you should be exposed out there. Everybody should see it.
And if you've seen your house the house is listed
and it's been on the market for four months then
and they've done a couple price reductions, then that's usually
a telltale sign the house is overpriced and it's time
to try to negotiate for something below list And so
(07:57):
you the buyer kind of get leverage in that situation.
So Redfinn CEO says, I don't even want that out there,
which again I don't agree with. I think the more
information that people have the better, Like they should all
have access to the information. The biggest thing that I
don't like is there's always some kind of like editorial
aspect to this. When I see articles like this that
(08:19):
they always make it seem like realtors want more money.
And I know that I said that about these big brokerages,
but remember what I said was, I can't see another
reason just because I'm a realtor, and I end up
I actually prefer not to do this, not to make
myself sound like I'm some hero or something, but I
don't like the double end deals. I always try to
(08:40):
find another agent that I could refer a buyer if
they come unrepresented, because that way that person could fight
for the buyer and I could fight for my seller.
I'm not in the middle of that. There's lots of
agents who disagree with me about that, and I'm not
here to argue that. I'm just saying that I can't
see a reason why. And I hate it when people
think and treat realtors like they are only in it
for the money, that they are entirely motivated by the money.
(09:03):
I'm not saying they don't exist. I'm just saying that
I don't think that they're the largest percentage of the
population of realtors. The realtors that I know, they're very philanthropic.
They get involved in a lot of community outreach and
because they want a network, yes with potential clients, but
also it keeps them informed on what's going on in
their committee. They donate to schools, they donate their time,
they donate to nonprofits, and so because that's part of
(09:26):
their job. As part of our job as a realtor
is to be aware of the communities that we live in,
be aware of property rights and protect them, and do
that for the public at large. So we're heroes, is
my point. Okay, when we come back, I want to
talk about should you buy a fixer and update it
or should you buy a house that is already updated.
It's a question I get a lot when I'm working
(09:48):
with buyers or at open houses.
Speaker 3 (09:49):
We'll talk about that later.
Speaker 1 (09:51):
You're listening to KFI AM six forty on demand.
Speaker 2 (09:55):
I'm justin worship here with you again talking Southern California
real estate until four o'clock. I'll be back again next
week two to four, and then we will see what
happens from there. Whenever I'm out with clients, and because
affordability is such a huge issue. I'm probably going to
beat that dead horse the whole time they let me
talk about its. Southern California real estate is just it's
(10:16):
so crazy expensive.
Speaker 3 (10:18):
It is so hard for people to.
Speaker 2 (10:19):
Find a house that they can own and live in
in Southern California. So everybody always is trying to figure
out what's the best way, what's the best way. Most
of my clients want something that's more updated. They don't
necessarily like what I call the Ikia wet dream that
a lot of people who renovate houses or flip them
to their it's prefab shaker style cabinets, very neutral like
(10:42):
Swiss coffee white throughout the house, some kind of like lightwood,
engineered or engineered wood, or vinyl luxury vinyl they like
to call it VLP flooring throughout and it feels very
sterile some of them. Most of them kind of like
the more like something that's maybe close to ten years
old and that that feels like a home.
Speaker 3 (11:01):
Still.
Speaker 2 (11:01):
They don't want something that's completely tricked out and updated
and new, But they all want to know what's the
best buy, Like does it make more sense? So financially,
I would argue that it makes the most sense to
buy a house that is a fixer, that is what
they call distressed or needs some updates for two reasons. One,
you get to make it the way you like it.
(11:23):
You get to pick all the finishes. So very rarely
are you paying a premium for all those updates only
to have them changed.
Speaker 3 (11:29):
This seaking witch.
Speaker 2 (11:30):
I'm sorry that I always interrupt my thoughts, but I
always find this as fascinating. There was this house. A
builder that I know built a huge house. It's up
in hidden hills and it was a huge house with
two guest house on it. Fifteen million dollars. Somebody paid
all cash, immediately bulldozed the two guesthouses and then gutted
the main house after paying fifteen million dollars cash for
(11:52):
it to make it the way they wanted it. And
everything was brand new construction by the way, anyway, So
what people want to do, You get to make it
the way you want it, right, You pick all the finishes,
and the money you put into it is becomes your equity.
Speaker 3 (12:06):
Right.
Speaker 2 (12:06):
There's a formula that we have, but there's no real
way to test this formula because in order for it
to be really accurate, you would have to compare two
exact homes without having any influence on it. So what
I'm saying is that there's a formula that says if
you put whatever you put into the house, you're gonna
get one and a half times that money back. So
let's say you put one hundred thousand dollars into renovations
(12:27):
into a home. You have now increased your home by
one hundred thousand dollars, so you get your money back,
and fifty thousand dollars more. So that's the money you
made from putting in new kitchens, new bathrooms. That's where
you're going to get the most bang for your Bucket's
number one the kitchen when you update a kitchen, and
then number two the bathrooms.
Speaker 3 (12:45):
And just to give you an idea too, what it costs.
Speaker 2 (12:47):
I tell people that if you're renovating a kitchen, a
fair ballpark figure is about forty to sixty thousand dollars. Now, again,
the nicer the finishes, the nicer the bells and whistles
you get, that obviously could go up. This is just
kind of average. And then a bathroom is about fifteen
to twenty thousand dollars to renovate it. So you get
that one and a half times back. But here's the
(13:07):
thing that I can't put a price on, and that
is all of the stress of construction, because almost across
the board, everybody who is thinking or considering doing this,
they're not in construction right Because if you are a contractor,
you already know and that's your plan to begin with.
You of the guys, you have the resources, you know
(13:28):
everything that you need, and you know how to do it.
But the people who are considering doing this are they
don't have any background in that and very rarely, because
it's so expensive to live or pay rent in southern California,
very rarely could people afford to carry their mortgage and
pay rent. So their plan is to live in the
house while it's being worked on. And that's a I
(13:50):
don't know, that's a surefire away to just destroy.
Speaker 3 (13:53):
A family my opinion.
Speaker 2 (13:55):
I'm laughing because I have an unpermitted one bedroom unit
on the back into my garage at my house, and
I was planning to add on to my house and
I was so smart. Guys, this is really why you
should listen to me. My plan was to take my
family of four and move them into this one bedroom
space that didn't really have a bedroom. It was just
(14:17):
a living area that we would all have to hang
out in and sleep in, like we were all glamping
in our backyard while they worked on the house. And
the average construction for something like a major renovation where
you're gutting a house and everything, you should at least
expect four to six months of construction. And that's if
you're not like adding square footage, you're not blowing out
a back wall and pushing out into.
Speaker 4 (14:38):
The back of your brother did that, and a good
friend of mine from high school, they did that when
they bought their properties. They one was in a track
home and then the other was just like an empty lot. Yeah,
and both times they ended up staying a little longer
in the trailers they than they had anticipated. In the
event of my brother though family of five.
Speaker 2 (14:56):
Yeah, yeah, then it didn't go well, I take it right,
like that was really how long were they in there?
Speaker 4 (15:02):
My god, it was a few months, and so they
ended up moving into the mom's house temporarily because two
months turned into three months. Yeah, you know, because stuff happened.
Speaker 2 (15:12):
My sister did that while they were building a guest
house with her new boyfriend, and she was staying in
a trailer and she did that for five months and
she was like, ugh, she was miserable, and it was just.
Speaker 3 (15:20):
Her and her boyfriend because her kids are all grown up.
Speaker 2 (15:22):
But yeah, so you gotta think about that.
Speaker 3 (15:25):
And I don't recommend it.
Speaker 2 (15:26):
So my recommendation would be that if you're planning to
do a major renovation after you purchase a house, build
into your budget getting a rental for a year. You
could try to get a six month lease on something.
But and they might be more popular now because I
think there's a lot of rental property owners out there
that are willing to be flexible on that because they're
planning on marketing it to people who are rebuilding from
(15:46):
the fires. So you might be able to find some
not short term lease. Short term lease is like less
than three a month. What we're talking about is anywhere
from three to six months less than a year, right,
So definitely build that into your plan. But the other
thing you got to think about, and I looked into this,
and this is I looked into this about the same
time I was thinking about adding onto my house. And
(16:06):
the data has not pivoted in the slightest seventy four
percent of people who do a home renovation regret it.
Now they're always happy with the product, but like they
regret the when they're in it, they always regret it.
Speaker 3 (16:18):
They always hate it.
Speaker 2 (16:19):
I don't know anybody who's ever renovated the house, even
people who do it for a living, Like I flipped houses,
and most of the time I flip houses. Even when
I feel like I'm making money, I still regret it.
It's still I just like, why did I sign up
for this? What was I thinking? Why did I do this?
This was a bad idea. Ninety two percent it positively
impacted their lives, because that's what happens after you get
(16:40):
through the misery. You're so happy with the house, so
there is that light at the end of the tunnel.
But here's the bigger one eighty percent go over budget.
So I always tell clients if you're planning a renovation
project when you buy a home, at least add ten
ten percent.
Speaker 3 (16:55):
To whatever you build, whatever, all.
Speaker 2 (16:57):
The invoices, the contractors and everything, at least throw ten percent.
If you really want to be safe, throw twenty percent
on top of that plan so you have some cushion.
Because there's always something that goes wrong. The other thing
people forget is permits and how long it takes to
get permits. Now, LADWDBS is pretty quick depending on what
you're doing. But the annoying part about dealing with these
(17:18):
planning planners at the city level is that you could
talk to one person one day and come back to
another person another day if that your person who's assigned
to your permits isn't there, and they could give you
an entirely different answer.
Speaker 3 (17:31):
Home inspectors as well are notorious.
Speaker 2 (17:33):
And I'm not talking about home inspectors when you buy,
the inspectors that come and inspect the construction that's being done.
I flipped the house and a guy came out and said,
you need to have an enclosure on the shower And
I said, what do you mean, like a shower curtain
or does it have to be a glass wall? And
all he would tell me is like it has to
have an enclosure. Like he just sat there and stared
at me and said, you need an enclosure. So I
rent out real quick, got twelve hundred dollars for a
glass enclosure on a shower door. They came back to
(17:54):
reinspect for the final sign off. He didn't even look
at the bathroom. He went into the microwave above, saw
that it wasn't a rigid or solid line to vent
out the fan above the stove, and he said, you
got to fix that, and then walked out.
Speaker 3 (18:05):
And that was all they did.
Speaker 2 (18:06):
So there's gonna be some pain, there's gonna be a
lot of heartache, and it's not gonna work out. The
other hard part is having enough cash on hand. A
lot of people think they could just borrow against the house,
but if you've already put twenty percent down, you don't
have room to borrow more money on your house. And
if you try to get a construction loan with not
having a ton of equity already in it, it's very
risky for lenders.
Speaker 3 (18:25):
Good luck finding somebody who will lend you that cash.
Speaker 2 (18:28):
All right, when we come back, I want to talk
about a rent control bill that is currently on the
Assembly floor that is gonna modify wants to modify the
current rent control bill, and why I think rent control
is a horrible thing.
Speaker 1 (18:40):
You're listening to KFI AM six forty on demand.
Speaker 2 (18:43):
This is justin worship talking Southern California real estate. Coming
up in the next hour I'm gonna have a state
planning attorney, Britney Britton from Best Coast Laws. She helped
me with my trust because if you own a home
in California in particular, you need to have it in
a trust, and you need to have a trust. And
we'll explain why you need that coming up at two
o'clock when we kick off the show after that, But
(19:06):
right now, I'm talking about rent control. So right now,
we have Assembly Bill fourteen eighty two, which I think
came out in like twenty twenty, and it currently sets
a cap of rent increases annually at five percent plus CPI,
which is cost of living increase.
Speaker 3 (19:22):
Right.
Speaker 2 (19:23):
Consumer price index is what CPI stands for, but it's
basically regular inflation, right.
Speaker 3 (19:28):
And then it also has a cap ten percent.
Speaker 2 (19:30):
Now, fun fact, La County already has a built in
ten percent cap because of the wildfire risk. Orange County
does not, but they currently do because of the fires.
So the state law supersedes all of that and says,
right now there is this emergency order in place that
says you can't raise rents more than ten percent, even
in Orange County because of the fires. They don't want
people gouging people with the rent. And this is where
(19:54):
I'm going to say this first before I start to
break this down. When I give you my take on this,
it's going to sound like I hate people who are
tenants and renters and I think that they're horrible people
and all of that stuff. And if that's the way
I come across, that's just poor word choice. That's not
my intent here. My intent is really that I think
(20:14):
when you talk about rent control, there's a realtor that
I know, Harrioti murri and who I think coined this phrase,
at least for me, And what he said is that
rent control is a forced subsidization of housing on the
people who own the home. So it's forcing people to
provide a government subsidy for their housing instead of letting
them take advantage of the property that they own and
(20:35):
use it. A lot of people use rental property as
a retirement income. And so when you start putting caps
and limits and regulating how they can charge for that,
and you're not allowing for accurate representations, because think about it,
we had what was it like, the thirty percent upwards
during the pandemic inflation, and that's not counting when people
weren't allowed, weren't required to pay rent, they could get
(20:56):
away from paying rent, and they allow people to stop
paying rent before they worked out any plan for rental
property owners to keep up with their mortgage payments or
any of that stuff. So they just immediately default to letting.
A rental property owner, in my opinion, get hosed to
benefit a tenant. And I just don't see that there
are large corporations representing the mass majority of people. And
if that is the case, then I'm wrong on those numbers.
(21:17):
Then who is severely not being considered in these situations
are senior citizens who use this as retirement income and
that's how they sustain themselves. But anyway, let me go
back to my original plans to explain what fourteen eighty two,
so it sets that cap. There's a ten percent cap
right now because the fires Forrange County, LA County. Now,
once a tenant has lived in a unit for a year,
(21:38):
they cannot be asked to vacate without just cause. So
they had this clause in fourteen eighty two. That's called
a no fault eviction. So before this you could just say, hey,
mister and missus tenant, I want to have my place
back to do whatever I want with it. Here's a
sixty day notice because you've been there for a year,
please vacate at the end of this sixty days And
(21:59):
everybody was now and then LA has some like they've
added some stuff in there where there's relocation fees that
have to be accounted for, and it is so complicated
that I can't even break it down on this show,
Like you really need to sit down with a lawyer
who specializes in this stuff because it also changes very regularly,
and because you got between the county and the cities
(22:19):
and then the state as well, there's lots of layers
of legislation to this. So now, the way it stands though,
is that you can only ask them to vacate if
you plan for your spouse or domestic partner, your child, grandchild,
your parent or grandparent to occupy the unit.
Speaker 3 (22:36):
So I have a client right now who.
Speaker 2 (22:38):
Just reached out to me and said, Hey, I think
my kid's going to have to move into my rental property.
Speaker 3 (22:41):
What can I do?
Speaker 2 (22:42):
And I told them exactly that, I said, you just
give them a sixty day notice towards the end of
their lease and say, my kid intends to occupy the
unit and you're good to go.
Speaker 3 (22:51):
Now.
Speaker 2 (22:51):
Single family homes and condos were exempt from fourteen eighty
two unless they were owned by a corporation LLC or
real estate investment trust or RET. If you don't know
what a rate is, ore eit real estate investment trust.
I think the best way to describe it. It's like
using real estate as a hedge fund. So these people
(23:13):
they build, they build up a portfolio of real estate
properties that are rented out for investment purposes, and then
everybody puts pitches their money in, and then they all
get a.
Speaker 3 (23:23):
Cut of the profits. That's what a reed is.
Speaker 2 (23:25):
So if you were involved in that, you could not
be exempt from this rent cap increase. If the house
was built within the last fifteen years, it was exempt.
Duplexes where one of the owner lived in one of
the units, you were exempt. And if it was already
susceptible to some other kind of rent control So obviously
because La County's rent control ordinance is lower than the
(23:46):
five percent, so if your property qualifies for La Counties,
then it's susceptible to La County's rent control cap. Oh man,
do I get Oh? No, I got time? Okayo had
a panic attack there for a second thought, we got
to go anyway. So what they're talking about now is
a new Assembly bill. It's eleven fifty seven, and what
it wants to do is it wants to set the
(24:07):
rent cap at two percent plus CPI, not the five
percent we already have. It wants it to be two
percent and instead of the ten percent absolute cap, it
wants to set the cap at five percent. So no
matter what the scenario, you cannot raise rents more than
five percent. The other thing is that Assembly Bill fourteen
eighty two, the one we're currently living in. It's sunsets
(24:29):
on January twenty thirty, so it goes away. The new
one eleven fifty seven would be indefinite, no way to
end it, unless you, of course, passed another wall. So
why do I think rent control is bad? Because it
doesn't work? And I would love for somebody to hit
the talkback feature because here's what I know. What I
know is if you are living in a rent control
(24:50):
unit right now, you love it and it works great
for you. I'm sure maybe not all of you, and
I'll explain why here in a second. But if you
are trying to get into rent. It doesn't make rents
more affordable. The latest example was, I think it was
twenty nineteen, the city of Glendale up in the San
Fernando Valley. They passed not even a rent control ordinance,
but there was an element of a seven percent cap
on rent increases there. Within three years of them passing
(25:13):
that rent control ordinance, they became the fourth most expensive
place to rent, beating Los Angeles and New York City.
Speaker 3 (25:22):
It doesn't work. When you look through and you google
the data.
Speaker 2 (25:25):
What it actually shows is it's a temporary stop to
rent increases, but in the long term it makes places
more expensive.
Speaker 3 (25:31):
So you ask yourself why.
Speaker 2 (25:33):
If you've been listening to all these shows that I've
been doing the past couple of weeks, you'll realize that
I like to talk about simple supply and demand economics.
Part of one aspect of rent control is it forces
tenants to stay there because they can't find another place
that is equally affordable, so there is no rotation of
the units. I found a stat that this was between
twenty twenty and twenty twenty four, only forty percent of
(25:56):
rent controlled units in La County were actually turned over,
so that represents about two hundred and forty thousand housing
units of the six hundred thousand total under the rent
control ordinance, So people stay there and in most cases
multiple generations. Like it just gets passed on and passed
on and passed on and passed on. The other problem
that I have with rent control is that when you
(26:17):
start to regulate and limit the profitability of an investment
for the owner, you're kind of backing them into a
corner to being a slumlord. There's not a lot of
money for them to make improvements to the property or
to handle deferred maintenance because they're just trying to make
ends meet, and they're just stringing everybody along. A lot
of people that I know that live in rent control units,
(26:38):
they're frustrated by their landlords or rental property owners because
they don't do anything. And I think that, sure, yes,
there are bad landlords out there, and in my experience,
most of the bad landlords are bad because they're ignorant,
not because they are genuinely bad people. They just don't
understand why you don't want to pay for everything, and
they don't understand that the obligation is for them to
pay for everything. But if you really look into rent
(27:00):
control as a thing. All of the data says that
it has a short term fix, but then things get
worse really really fast. And I think it's because when
you get a government involved in trying to regulate pricing
on things, it just I don't know. I wish again
hit that talkback feature, let me know of tell me
I'm wrong. I would love I would love to have
my mind blown and my eyes open to this. Anyway,
(27:22):
when we come back, I'm going to talk about ways
that you could save money on housing, how could you
find a way to live.
Speaker 3 (27:29):
I'm going to give you some little hacks. When we
come back.
Speaker 1 (27:32):
You're listening to KFI AM six forty on demand.
Speaker 2 (27:35):
I'm justin Morrish from talking Southern California at real Estate
with you. Coming up at the top of the hour,
we are going to have a state planning attorney, Britney
Britton from Best Coast Law. She's going to be talking trusts.
If you own a home and anywhere in California, actually
you should have a trust, and I'll explain why and
all of the benefits with the help of Britney coming up.
If you have questions about a trust, use that talkback feature.
(27:57):
And send it my way. I want to talk about
saving money on housing because again, it comes up all
the time when I'm working with clients, and I think
this is probably going to be more targeted to younger
people coming to Southern California and either trying to build
a life for themselves. A lot of people come here
for the industry, I think, and other stuff. I'm sure too,
but most of the clients I come across, they're here
(28:19):
for the industry and they need to find a way
to minimize their expenses. The one that is probably least applicable,
or probably something that people are like, eh, I don't
know if I like that unless you're in your twenties
is house hacking. And if you're not familiar with this term,
it's where you buy a place with the intent of
renting out rooms within the house. So the problem with
(28:42):
that is that you have to be somebody who is
of a certain age that you have enough money, but
maybe you have a family who's willing to help you
buy a place and they're helping you with the down payment. Now,
so you go in, you buy the place, and then
you rent out the other rooms. But the key is
you have to be able to qualify for the mortgage
without a rental income. That's another mistake I get with
(29:02):
a lot of clients as they think that they could say, well,
I'm going to buy this house, but I know I
can rent each of those bedrooms out for a thousand
dollars a month, So can that be part of the
equation when you're doing the math for me to get
a home loan, and it just does not work that way.
So that only really applies if you can afford to
buy like a town home or a condo, but you're
not really comfortable with the payment. Because I've had clients
(29:24):
who can afford or qualify for up to a million
dollar purchase or more, but then when they see that payment,
they're like, Nope, don't want to pay that, regardless of
what they can actually qualify for, right like it doesn't matter,
Like I don't care that I can technically on paper
afford that. I don't want to pay that each month.
That scares a living crap out of me. So they
(29:44):
will oftentimes buy obviously a less expensive home. Now when
you should not do, what you should not do in
house hacking is try to buy a house with a friend, right,
don't go in as a quote unquote.
Speaker 3 (29:58):
Partner and like we're gonna split it cross this house.
Speaker 2 (30:00):
And that's I mean, I don't know, you got to
really know this person well, but I just feel like
that's a big recipe for problems. And the reason I
say this actually is because I had somebody reach out
to me who would listen to the show. And they're
going through, now this is years down the road. They're
going through a title fight, not really a fight. Maybe
that's not the right word. I apologize for using the
(30:20):
poor word if you're still listening to the show, but.
Speaker 3 (30:23):
They're right now.
Speaker 2 (30:24):
Their mom is the one who bought this duplex, and
they bought it with another family. So they the two
families came together and they bought this duplex. One lived
in one, the other lived in the other. But then
eventually they moved out and they rented it. But they
share this property. But they're not married, right, They're not
a couple. It's two separate, independent families. And now those
people are of an age where they're at the end
(30:45):
of their time. And so now these kids who have
no relation or no connection to this other family are
now going to be forced to work with this family
somebody's got to figure out a way to buy somebody
else out. And when it's a rental property, this I
think happened to be down at San Diego, but if
it's a rental property up here in La County, and
it could be hard to relocate a tenant in that situation.
I've also helped people try to sell a lot of
(31:07):
land that they bought with another family, and that was
a whole set of problems because the two families disagreed
on who they should hire as a realtor, or how
much they should be able to pay and commission what
they should list it for. There's all these opportunities for disagreement.
The other thing is, and this I actually stole from
my wife when she was doing home loans, is that
I don't recommend anybody buy a home with a boyfriend
(31:28):
or a girlfriend. If you can't qualify to buy that
house on your own and you were not interested in
putting a ring on it, then it's probably not a
good idea to go purchase a home with that person.
Wait until you've you've gotten comfortable enough to get married. Now,
the other thing I want to share with you as
a way to save money on housing is what I did.
This is how I saved up for my house, and
(31:49):
I think it's a very underrated way to deal with
high cost of living, especially if you're a young person.
Property management. So in the state of California, if the
the apartment building has sixteen units or more, they are
required by law to have an on site manager. Somebody
there has to be the designated manager. Now, the assumption
(32:11):
that people make is that if you're going to be
an on site property manager is that you have to
understand plumbing and electrical and you have to be able
to fix stuff. But in my experience, most of the time,
especially if you're working for a property management company, they
don't want you to do that. Because I have a
rental property in North Carolina that's handled by a property
management company and she prefers that I use her vendors
(32:33):
because she marks it up a little bit, much like
a general contractor usually marks up about twenty thirty percent.
So whatever bid they're getting, so they have a painter,
they have a plumber, they have an electrician. They gather
all that and they get their bills and that becomes
their bill, and then they add another twenty thirty percent
for themselves to basically manage the process. And that's how
they make money for placing you with all those people. Right, So,
(32:53):
same kind of thing. They want you to use their
plumbers because they charge a premium to the rental property owner.
They don't need you to even and understand how to
do that. They just need you to be there and
the field the phone calls and handle the information and
do what is best for the tenants. So you don't
need to worry about that. You don't even need to
be a real estate professional. I actually got my real
estate license after becoming a property manager.
Speaker 3 (33:15):
Now here's what I'll tell you.
Speaker 2 (33:16):
The people that have become property managers almost across the board.
You are working for a crazy owner that you've got
to be willing to deal with that kind of you
know stress. I wouldn't call the owners that I worked
for crazy at all, but they did have in my opinion,
they had like they just didn't quite understand the value
of their units. As an example, I was pretty good
(33:39):
at I'll give you a tip in case you do
become a property manager.
Speaker 3 (33:43):
I was.
Speaker 2 (33:43):
I got to the point wherein after the first six
months of taking over that building that I managed for
almost four years. I had it one hundred percent occupied
one hundred percent of the year, and that not to
toot my own horn, but that's pretty difficult to do
because you almost always have one or two vacancies, and
I took it over with three vacant units that had
been vacant for almost a month each of them. So
when you're the owner of this apartment building, that means
(34:05):
you're not making as much money. You're not optimizing your
investment or your business in that building. So you want
a manager who's going to fill it and fill it
every day. So what I would do is that when
a tenant came to me and said, hey, I found
another place, I'm giving you my thirty day notice, I
would always say the same thing to them.
Speaker 3 (34:21):
I'd say, how soon can you move in?
Speaker 2 (34:23):
And usually everybody who knows if you've rented, usually you
end up paying at least two to three weeks of
like two rents. Right, there's always that crossover because you
can't make it time out exactly perfect. You have to
find the new place first, get them to agree to
a timeframe for the new lease, and then you have
to give notice to your existing landlord or rental property owner,
So I would say, move into the new place and
(34:44):
let me flip it, right, So that would mean putting
a new carpet, putting in, painting it, anything else that
I needed to do. I could flip an apartment in
about three to five days, so they would move out
one weekend Monday to Friday. I would have it flipped
and it would be ready to show the following weekend.
And at this time the rental market was so hot,
I could have a new tenant in place. After that
first weekend of showing the unit, I would have a
(35:04):
new lease signed. So how does everybody benefit on this? Well,
if you're the exiting tenant, right, you've already paid that
one month's rent. And now what I can do, because
you paid rent for the time that the unit was
being flipped, When I get the new rent coming in,
when you get your security deposit back, I get to
credit you back that two weeks of rent that you
(35:24):
paid for because we already have somebody else paying it.
In most cases, because markets trend upwards, especially in the
rental market, I'm making the owner more money with the
new tenant, so they're more than happy to give the
money back to the old tenant for that two week
period and there are zero days where that unit isn't
(35:45):
making money for the owner. So they loved it and
it was great for me. I managed a twenty seven
unit apartment building. I said on the show before, I
maybe spent twenty hours a week. I mean there were
some times where it was more I met twenty hours
a month. Sorry, I would maybe spend twenty hours a
month working on the building. And that would include like
I would go clean the furniture in the courtyard and
(36:06):
I would get the cobwebs out of the stairwell, like
it wasn't such a big building that we had a
cleaning service or anything like that, and then I would
there was small maintenance stuff that I would handle.
Speaker 3 (36:15):
But for the most part, it wasn't bad.
Speaker 2 (36:17):
The funniest thing that I dealt with was that I
had to we had a leak, and it was the
weekend and my wife was working and I was home
with my kids. And this is back when they were toddlers,
and we had a guy come and because our usual
plumber doesn't work on the weekend, so I think I
had to call like a rotor ruter type company.
Speaker 3 (36:34):
I don't even know if that's the right name of
the company.
Speaker 2 (36:36):
But it was like a commercial plumber that had like
tons of vans that were all painted the same color
with the same logo, not like an independent person. And
they said that it was going to be two hundred
and seventy five dollars to clear a clog and a
toilet drain, and so the owner asked me to say,
ask him if they'll do it for one hundred and
fifty and I was like, they're so, and so they
don't negotiate, and she's like, everybody negotiates. Ask him, and
(36:57):
so I asked him and the guy literally said he
goes no or so, and so we don't negotiate. And
then they're like okay, she goes, well call somebody else.
And I said, I'll tell you what I'll pay the
one hundred and seventy five dollars difference or whatever it was.
She's like, what, I go, I got two kids. It
was one hundred and fifty dollars. I go, I'll give
you one hundred and fifty dollars. And when I kind
of put that up in a mirror tour, I think
she was like, oh, yeah, you're right, I'm haggling over
one hundred and fifty dollars when the building is like
(37:19):
forty thousand dollars a month in income. Maybe that doesn't
make the most sense in the world, but it was
how I saved up. So I wasn't paying rent on
the unit, and I had like a I think it
was like a fifteen hundred square foot three bedroom, two bath.
I started in a twelve hundred square foot two bedroom,
two bath townhouse style apartment, and then when my wife
got pregnant with our second son, she let us move
(37:39):
into a three bedroom unit, so each of the kids
had their own bedroom, and it was a great gig man.
I fully intended on doing that until I could save
up for half of a home. But I just kept
paying myself the rent that I would normally be paying,
and that's how I saved up for a down payment
for my house.
Speaker 3 (37:54):
So it's a great way.
Speaker 2 (37:55):
And I was a touring comedian at the time, so
I wasn't even there all the time when I was
dealing it. Okay, Brittany Britton from Best Coast Law is
going to be talking trusts and estate planning. Do not
miss this. This is a big deal for me and
I'll tell you why when we come back. KFI AM
six forty on demand
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