Latest / Own More Doors / #8 California's New Balcony Inspection Law Explained | Multifamily Market Update & More (Cody Charnell)

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#8 California's New Balcony Inspection Law Explained | Multifamily Market Update & More (Cody Charnell) · Own More Doors

• 0:00
  SPEAKER_01: Hey everyone, Juan Weezer here, president of St.
• 0:02
  SPEAKER_01: Real Estate, and we're with another podcast.
• 0:04
  SPEAKER_01: This time we're going to be talking about the balcony inspection law that is closely coming.
• 0:09
  SPEAKER_01: I mean, we're six months away, Cody, from this inspection law.
• 0:12
  SPEAKER_01: That I'll I'll be honest with you, most apartment owners, brokers don't even know that this is a requirement.
• 0:19
  SPEAKER_01: Um if you own three units or more in California, you are required, if you have balconies, stairs that face the elements, meaning like it's not enclosed within the units, you're going to be required to have an inspection.
• 0:36
  SPEAKER_01: And so we're going to dive into that today.
• 0:38
  SPEAKER_01: Um, I'm here with Cody Charnell, one of the brokers here at Sage Real Estate.
• 0:41
  SPEAKER_01: Uh, Cody's been an amazing addition to Sage Real Estate.
• 0:44
  SPEAKER_01: We're really, really lucky to have Cody here with us.
• 0:47
  SPEAKER_01: Cody, welcome.
• 0:48
  SPEAKER_01: Thanks.
• 0:48
  SPEAKER_01: Thanks for having me.
• 0:49
  SPEAKER_01: Cody, um, you know, in the world of apartment ownership, sometimes we we don't realize how up to date we need to be on things.
• 0:58
  SPEAKER_01: And I believe that maybe 15, 20 years ago this wasn't an issue.
• 1:01
  SPEAKER_01: But now I feel like every month we're coming out with some like um urgent announcement of owners need to know this.
• 1:09
  SPEAKER_01: Uh, talk to us about what you know about the balcony inspection.
• 1:12
  SPEAKER_01: It's kind of some of the feedback that you're getting from some of the clients out there.
• 1:16
  SPEAKER_00: Um, so basically, the reason that this law came into being is um a few years back there was a big balcony collapse up in Berkeley.
• 1:24
  SPEAKER_00: So um there was 14 college kids out on the balcony.
• 1:28
  SPEAKER_00: Uh basically the structural elements had decayed and nobody knew about it and uh caused the balcony to collapse.
• 1:37
  SPEAKER_00: And unfortunately, like six of the students ended up passing away.
• 1:41
  SPEAKER_00: So um I I think a lot of the laws that are kind of coming out right now are reactionary and because of things that just happen, you know.
• 1:51
  SPEAKER_00: So I I think this is just one of those new things that came up that people weren't really paying attention to, but now that there's been a tragedy and it's it's something that's been in the news, you know, we're we're having to deal with that as apartment owners.
• 2:04
  SPEAKER_01: So the law is SB326.
• 2:07
  SPEAKER_01: And again, if you know, so I I did a presentation this morning and I mentioned this, and someone said, Hey, I I own a duplex.
• 2:15
  SPEAKER_01: And so people who have a duplex who have stairs and balconies, they don't have to do the inspection.
• 2:21
  SPEAKER_01: Um, I checked in with the property manager, and more and more people are asking uh sellers, owners are not asking me.
• 2:28
  SPEAKER_01: That tells me owners do not know.
• 2:30
  SPEAKER_01: But I'm hearing from insurance agents, I'm hearing from property managers.
• 2:34
  SPEAKER_01: And so I'm gonna give you guys just like some basic facts.
• 2:38
  SPEAKER_01: So, three units or more, you have to have this inspection.
• 2:41
  SPEAKER_01: So, a couple things.
• 2:42
  SPEAKER_01: Some people are making the assumption that if you have an inspection, you're gonna have to do work.
• 2:47
  SPEAKER_01: That's not necessarily true.
• 2:49
  SPEAKER_01: Uh, everyone is gonna have to do the inspection.
• 2:52
  SPEAKER_01: That's definitely mandatory.
• 2:54
  SPEAKER_01: But the work part, that's only if the contractor, that's the other important issue.
• 2:59
  SPEAKER_01: The contractor has it has to have an A, B, or C license.
• 3:02
  SPEAKER_01: And so you can imagine.
• 3:03
  SPEAKER_01: So if you're a contractor, this is gonna create a lot of opportunity because there are thousands, uh, thousands of units here in Long Beach alone.
• 3:11
  SPEAKER_01: This is just Long Beach.
• 3:12
  SPEAKER_01: I mean, think about Southern California, think of all of California.
• 3:15
  SPEAKER_01: And I want everyone to know, be very clear that this is all of California.
• 3:19
  SPEAKER_01: So the first part is you have to have an inspection.
• 3:22
  SPEAKER_01: If the contractor determines that work needs to be done because maybe something is not reinforced, it wasn't built right.
• 3:28
  SPEAKER_01: Um, sometimes the the wood has um either uh termite, you know, it's it's it's um it's got termites, the weather has has weakened uh the structural integrity, and maybe they determine that you're gonna need to do some work to it.
• 3:43
  SPEAKER_01: They're gonna give you 120 days to do the work.
• 3:46
  SPEAKER_01: Um, part two of that, the contractor who does the inspection is not allowed to do the work.
• 3:53
  SPEAKER_01: So, some little technical stuff to kind of note.
• 3:56
  SPEAKER_01: I would say I I am afraid that most of the people don't know about this, Cody, and that's kind of why we're doing this today is to let people know.
• 4:04
  SPEAKER_01: Um, one other part, some of the quotes that I'm hearing from some of the folks that have been proactively done this before it gets too crazy.
• 4:14
  SPEAKER_01: I mean, we're six months away from from this being due and most people not knowing.
• 4:19
  SPEAKER_01: And so some of the quotes that I've seen, um, most of them have been at$1,500, Cody.
• 4:25
  SPEAKER_01: Uh, one of them today that I heard from my property manager contacts said$800.
• 4:29
  SPEAKER_01: And the only reason I think he was able to do$800 was for the pure fact that he's a property manager and he's probably going to be able to bring in a lot more jobs to that company.
• 4:37
  SPEAKER_01: So they gave favorable ratings.
• 4:39
  SPEAKER_01: But for anyone who owns, say, a four unit, maybe a six unit, they may not get that favorable rating.
• 4:45
  SPEAKER_00: Got it.
• 4:46
  SPEAKER_00: Yeah, that's it's uh not cheap to inspect, you know.
• 4:50
  SPEAKER_00: Um, and what people don't realize is, you know, even in a lot of cases, the the wooden elements that are gonna need to be inspected are not visible to the eye.
• 5:01
  SPEAKER_00: So in these inspections, you know, if you have a deck that um tenants walk across to get to units and it's stuccoed kind of all around, the the contractors are gonna have to cut that stucco open so that they can expect inspect the wooden elements.
• 5:16
  SPEAKER_00: So it's it's not just you know as simple as going out and looking.
• 5:20
  SPEAKER_00: Um, you know, sometimes they do have to do some invasive stuff.
• 5:23
  SPEAKER_00: So it it it does sort of make sense that there's a little bit higher price tag than you may have expected initially.
• 5:29
  SPEAKER_01: One of the things that I suggest, so I I have a four-unit building and there Cody, believe it or not, there's there's three separate staircases to the second floor, three of them.
• 5:40
  SPEAKER_01: So now like there's just more staircases than I than I um than we probably wish we had, right?
• 5:47
  SPEAKER_01: And so I met a contractor out there today for for one of the reasons is that it's been a little shaky to me.
• 5:53
  SPEAKER_01: And so we looked at it and he says, hey, this needs to be completely rebuilt.
• 5:57
  SPEAKER_01: And he was recommending you should build it um out of metal now, like no longer use wood.
• 6:04
  SPEAKER_01: He said wood, wood would be cheaper, but metal would last much longer.
• 6:08
  SPEAKER_01: And I think what's gonna happen, what do you think is gonna happen, Cody?
• 6:12
  SPEAKER_01: Well, I think most people are probably not gonna get the inspection, and so there's gonna be some uh notices that go out.
• 6:18
  SPEAKER_01: I don't know how quick or proactive the state's gonna be or the city's gonna be about penalizing those who don't get the uh the inspections done.
• 6:27
  SPEAKER_01: Is this what do you think this does to someone who's already thinking that they're not happy with owning rental properties in California, Cody?
• 6:36
  SPEAKER_00: Oh man, um, it could be the straw that breaks the camel's back.
• 6:40
  SPEAKER_00: You know, property owners have dealt with so much over the last few years with different notices that have to go out, different ways they have to compensate tenants and different laws they have to, you know, now abide by.
• 6:51
  SPEAKER_00: So um it gets tough for people.
• 6:53
  SPEAKER_00: At some point, some people are gonna tap out and potentially exit the market over stuff like this.
• 6:58
  SPEAKER_00: You know, if somebody does this inspection for 1500 bucks and then they find out there's$20,000 worth of work that needs to be done, that could be detrimental to a lot of people.
• 7:06
  SPEAKER_00: Um, actually, I have a question about how this all works and your understanding of this.
• 7:13
  SPEAKER_00: So if somebody does, or if somebody goes through the process of getting um their exterior wooden elements, you know, inspected, what do they do with that physical report?
• 7:24
  SPEAKER_00: Do they just keep that or do they have to report it to some you know governing body to prove that they've done this?
• 7:30
  SPEAKER_00: Or how does that piece work?
• 7:32
  SPEAKER_01: That's a good question, Cody.
• 7:33
  SPEAKER_01: And I am not gonna pretend like I know the answer to that yet, but um, I was thinking the same thing.
• 7:38
  SPEAKER_01: Who who's the auditor?
• 7:39
  SPEAKER_01: Who who do we, you know, this is kind of like a report card.
• 7:42
  SPEAKER_01: Who do we turn this into?
• 7:43
  SPEAKER_01: Right.
• 7:44
  SPEAKER_01: Yeah.
• 7:44
  SPEAKER_01: And so I'm not 100% sure.
• 7:46
  SPEAKER_01: I mean, we'll we'll certainly get some more um information on this.
• 7:51
  SPEAKER_01: Uh, we do plan on having a contractor come in and kind of tell us exactly what they're gonna be looking for.
• 7:56
  SPEAKER_01: Um we this week I wrote up an offer for uh one of our clients, and she wanted to discount the price by$100,000 because she said, I'm gonna have to fix the balconies and the stairs.
• 8:09
  SPEAKER_01: And I had a reminder, Cody.
• 8:11
  SPEAKER_01: I said, Hey, just because you have to have an inspection doesn't necessarily mean there's gonna be work.
• 8:15
  SPEAKER_01: And this is before she walks the property.
• 8:16
  SPEAKER_01: But this is kind of like this is gonna be one of those things where the buyer's gonna be worried about it.
• 8:23
  SPEAKER_01: And when I told the seller, hey, um, how about the balcony inspection?
• 8:28
  SPEAKER_01: And this is like a 12-unit building, Cody, the seller said, I don't know what you're talking about.
• 8:33
  SPEAKER_01: Meaning that he did not know that this was gonna be a requirement.
• 8:35
  SPEAKER_01: I don't blame him.
• 8:36
  SPEAKER_01: I think the majority of the people that we service aren't gonna know about this.
• 8:40
  SPEAKER_01: And I think it's gonna catch a lot of people.
• 8:43
  SPEAKER_01: Uh they're gonna be blindsided by it.
• 8:45
  SPEAKER_00: Yeah, I can see the same thing happening.
• 8:47
  SPEAKER_01: Uh, Cody, let's talk about what you're experiencing right now in the market.
• 8:52
  SPEAKER_01: I know that you that you sell a lot of properties, you help a lot of people into their their first investment, you help people trade up whether they have a duplex, a triplex, or a four-plex, sell and then get larger units.
• 9:05
  SPEAKER_01: Why don't you give us uh kind of an update on what you're seeing?
• 9:08
  SPEAKER_01: So now we're at the end of May, so May 31st, 2024.
• 9:12
  SPEAKER_01: What do you make of the first five months?
• 9:14
  SPEAKER_01: And how do you uh see things going the rest of the year?
• 9:18
  SPEAKER_00: Yeah, uh it's been surprisingly busy for me.
• 9:22
  SPEAKER_00: Um, you know, I I haven't seen much of a change in inventory.
• 9:26
  SPEAKER_00: Um, and I've as we've talked about in the past, um, maybe maybe you haven't talked about it on the podcast, but I know we've talked about this.
• 9:32
  SPEAKER_00: Um, there's there's sort of two segments of the market that are acting a bit differently.
• 9:37
  SPEAKER_00: So you have your two to four unit properties with residential financing.
• 9:41
  SPEAKER_00: A lot of those owners are are locked into really low interest rate loans that are fixed for 30 years.
• 9:48
  SPEAKER_00: And then you have the five unit and up properties.
• 9:51
  SPEAKER_00: And those loans typically are only fixed for three, five, sometimes seven or ten years.
• 9:57
  SPEAKER_00: And a lot of people who purchased or refinanced buildings a few years back, their loans are starting to adjust and they're jumping from you know low threes to um high sixes.
• 10:06
  SPEAKER_00: So their mortgage rate is doubling in a lot of cases.
• 10:09
  SPEAKER_00: So uh what I'm seeing in the five unit and up space is prices are very slowly continuing to come down.
• 10:18
  SPEAKER_00: So uh if you're familiar with gross rent multiplier, um, you know, a couple of years ago, five and up buildings were trading uh like 13 times gross, right?
• 10:28
  SPEAKER_00: Okay.
• 10:28
  SPEAKER_01: And so, and so let me just explain that.
• 10:30
  SPEAKER_01: So if someone's hearing this, um the gross rent multiplier is taking the annual rent of a property, so all the income, uh, we're completely ignoring expenses in this ex uh in this uh specific uh calculus uh calculation, and we're multiplying it times a multiplier.
• 10:46
  SPEAKER_01: So in this case, when Cody says 13, we're taking the gross income of a property, multiplying it times 13, and that's gonna spit out a value.
• 10:54
  SPEAKER_01: And so what Cody was saying is that in the past, if someone just called him out of the blue and said, This is how much money I'm making on my property, Cody being so knowledgeable in in the Long Beach market, he's gonna say, Hey, um, kind of behind the uh napkin calculation, let's multiply it times 13.
• 11:12
  SPEAKER_01: He's gonna come up with a value.
• 11:13
  SPEAKER_01: So that was a couple years ago, you said, Cody?
• 11:15
  SPEAKER_01: That's 13.
• 11:17
  SPEAKER_00: What are you seeing now?
• 11:19
  SPEAKER_00: So now I'm seeing 11s pretty consistently, 11 times gross.
• 11:24
  SPEAKER_00: Okay.
• 11:24
  SPEAKER_00: So you're you're basically we've basically gone from 13 down to 11.
• 11:28
  SPEAKER_00: So, you know, if your building is making a hundred thousand dollars a year, um, a few years ago you would have multiplied that by 13 and you would come up with an like a rough idea of value of 1.3.
• 11:39
  SPEAKER_00: Yeah.
• 11:39
  SPEAKER_00: Now I'm seeing 11 pretty consistently.
• 11:41
  SPEAKER_00: So if your building's making 100 grand, uh you multiply that by 11, your value's roughly 1.1.
• 11:47
  SPEAKER_00: So it prices have come down pretty considerably.
• 11:50
  SPEAKER_01: I mean, that's that's that's close to$200,000.
• 11:53
  SPEAKER_01: Yeah.
• 11:54
  SPEAKER_01: That someone could have potentially paper loss, we'll call it.
• 11:57
  SPEAKER_01: You know, they have it technically lost until they sell it.
• 11:59
  SPEAKER_00: Right, right.
• 12:00
  SPEAKER_01: Yeah.
• 12:00
  SPEAKER_01: So I and so, but but even from a percentage, that's that's a huge percentage of loss of loss in value.
• 12:06
  SPEAKER_00: It is, yeah.
• 12:07
  SPEAKER_00: It's it's surprising.
• 12:10
  SPEAKER_00: Um, I think prices have come down enough now to where you know there's there's buyers who are interested again, and at 11 times gross, it seems like buildings are starting to sell quicker than they were previously.
• 12:22
  SPEAKER_00: So I think we're maybe settling on pricing.
• 12:26
  SPEAKER_00: Um, you know, it is dependent a lot on what happens with interest rates moving forward.
• 12:30
  SPEAKER_00: So if they if interest rates come down, I'm sure GRMs are gonna, you know, bump up a bit if they do the opposite and interest rates continue to go up.
• 12:38
  SPEAKER_00: We'll probably see prices continue to come down.
• 12:40
  SPEAKER_00: Um, but the five unit and up space has been more sensitive to the rate swings.
• 12:44
  SPEAKER_00: Okay.
• 12:44
  SPEAKER_00: The the two to four unit properties, um, there's there's not as much urgency there.
• 12:49
  SPEAKER_00: Like those owners, because they have 30 or fixed financing, they're not really forced to sell in a lot of cases.
• 12:56
  SPEAKER_00: So you see more owners um choosing to just hold on to properties if they're not getting their number.
• 13:02
  SPEAKER_00: Um, and and you also see gross rent multipliers have come down a little bit on four-unit buildings, but it hasn't been nearly as dramatic as the five and up.
• 13:11
  SPEAKER_01: When you call a client right now and you're looking at say an eight-unit building and you're like, hey, I found a building, it's off market, and it's at 11 times gross.
• 13:21
  SPEAKER_01: How is that being received?
• 13:22
  SPEAKER_01: Like, does does the investor like to hear that?
• 13:25
  SPEAKER_01: Or or or or or is or is 11 not good enough?
• 13:29
  SPEAKER_00: Uh, it can be good enough in a lot of cases.
• 13:31
  SPEAKER_00: Okay.
• 13:31
  SPEAKER_00: Um, some some questions that they'll usually ask is is there upside?
• 13:34
  SPEAKER_00: You know, can I get can I buy this, raise rents, and get it to operate better than 11?
• 13:39
  SPEAKER_00: And a lot of times you can.
• 13:40
  SPEAKER_00: Um, and the other big question that people ask is how much am I gonna have to put down?
• 13:45
  SPEAKER_00: Because the commercial loans that you use to buy five unit properties, um, there's a couple limiting factors.
• 13:52
  SPEAKER_00: One of one of them, and probably the most limiting factor, is your debt service coverage ratio.
• 13:58
  SPEAKER_00: Um, so basically it's the the bank is going to require you to put enough money down to make the property cash flow right out of the gate.
• 14:06
  SPEAKER_00: And um with interest rates where they are, it's taking pretty sizable down payments to make that work.
• 14:12
  SPEAKER_00: Like 40% down is not uncommon.
• 14:16
  SPEAKER_01: So Cody, I'm seeing 50, 60, 70 in some places.
• 14:20
  SPEAKER_00: Yeah, yeah.
• 14:21
  SPEAKER_00: I'm as well.
• 14:22
  SPEAKER_01: We we sold uh these two large units in Arcadia totaling 30, 30 doors together combined, you know, they were side by side.
• 14:31
  SPEAKER_01: And the person who bought it, in order to get to the debt coverage ratio, had to put 70% down.
• 14:35
  SPEAKER_01: I mean, that's literally almost like a cash purchase at that moment, you know, in terms of not being able to borrow.
• 14:41
  SPEAKER_01: One thing that I wanted to ask you, Cody.
• 14:44
  SPEAKER_01: In the beginning of the year, we thought we had like this perfect um scenario of if you owned um, say a duplex, triplex, or fourplex, you could sell at the top and you can maximize that investment.
• 14:58
  SPEAKER_01: And then we were telling people, hey, sell at the top.
• 15:01
  SPEAKER_01: There's a great market, there's a good time to sell right now if you own four or less, and then we'll help you trade into say five, six, seven, eight units, double the amount of doors.
• 15:12
  SPEAKER_01: And when you said earlier that they're more sensitive to the to the interest rate, that there's more opportunity.
• 15:18
  SPEAKER_01: So what we were pitching, and and I thought we were right, and I just kind of want to get your insights is hey, sell like you have this perfect storm, you get to sell at the top with the smaller doors and buy at the bottom or lowered, lowered with more doors.
• 15:35
  SPEAKER_01: I loved that that possibility.
• 15:38
  SPEAKER_01: Is that really happening, Cody?
• 15:40
  SPEAKER_01: Or what do you think got in the way of that?
• 15:42
  SPEAKER_00: Um, it is happening.
• 15:43
  SPEAKER_00: So I actually have a couple of clients right now.
• 15:46
  SPEAKER_00: They're selling two four-unit buildings and they plan to exchange into one five-unit and up building.
• 15:52
  SPEAKER_00: So they did recognize that discrepancy in pricing between the two to four and the five unit properties, so they're taking advantage of that.
• 16:00
  SPEAKER_00: Um, I think one thing that may get in the way of doing that sort of exchange for people is um, you know, they're losing out on or they're losing their interest rate, they're giving up their interest rate that they have, which is probably irreplaceable, right?
• 16:16
  SPEAKER_00: Um and they're they're trading into a five-unit enough building that's still going to require a large amount of money down.
• 16:24
  SPEAKER_00: So they they may not be able to increase their leverage like um a lot of people want to do when they're trading up.
• 16:30
  SPEAKER_00: Um and the cash flow might be a little bit worse because they're trading into a higher interest rate, but um, I think people still are recognizing the value there, right?
• 16:40
  SPEAKER_00: So when interest rates do eventually come down, um, I I think we will see prices adjust for the five and up buildings.
• 16:48
  SPEAKER_01: I have a three unit and a four unit, and right now I'm actively uh looking at my options of of getting those sold.
• 16:56
  SPEAKER_01: And and um and Cody, I have really good interest rates, but I just believe this is the right time to get the very best deal with the larger doors.
• 17:04
  SPEAKER_01: Like this would be the opportune time to trade up.
• 17:06
  SPEAKER_00: Yeah, yeah.
• 17:07
  SPEAKER_00: I I don't think you're wrong.
• 17:09
  SPEAKER_01: Let me let me talk about something else.
• 17:12
  SPEAKER_01: We um you currently have two fourplexes in Long Beach um listed.
• 17:17
  SPEAKER_01: I have two listed in Long Beach, and and um there's been a major slowdown, in my opinion, with the fourplex market.
• 17:26
  SPEAKER_01: I mean, we're not getting the amount of calls that we were once getting.
• 17:29
  SPEAKER_01: And um I wanted to give one of our clients an update yesterday, and I just want, you know, we were 24 days on the market.
• 17:38
  SPEAKER_01: We've gotten two offers, but they've been less than asking.
• 17:40
  SPEAKER_01: Clients not don't necessarily want to sell it for less than our asking price.
• 17:45
  SPEAKER_01: And I, you know, I had to remind them that hey, currently we're at the end of May.
• 17:53
  SPEAKER_01: So this is a full five months of 2024.
• 17:55
  SPEAKER_01: There's been 14 fourplex sales all year.
• 17:59
  SPEAKER_01: 14.
• 18:00
  SPEAKER_00: That's crazy low.
• 18:01
  SPEAKER_01: That is that is the lowest that I've seen since we've been following this.
• 18:04
  SPEAKER_01: So if we go back 10 years, that's the lowest that I've seen.
• 18:07
  SPEAKER_01: So just to give someone perspective, in a in a normal average year in Long Beach, there's about a hundred fourplex sales.
• 18:17
  SPEAKER_01: A hundred folks, we've only sold 14.
• 18:20
  SPEAKER_01: Like we're not gonna be anywhere near that.
• 18:22
  SPEAKER_01: That means if this keeps up, we're probably gonna be around 30.
• 18:27
  SPEAKER_01: Wow, that would be like a 70% sales, um, sales, sales drop in in in the foreplexes.
• 18:35
  SPEAKER_01: So although and although we're telling people, hey, this is a good time to sell, uh, pricing matters and you have to price appropriately, and a lot of things come into consideration.
• 18:47
  SPEAKER_01: I mean, condition could be one of them.
• 18:50
  SPEAKER_01: Um, having delivering vacant units is one of them.
• 18:53
  SPEAKER_01: Having low rents is gonna hurt you.
• 18:56
  SPEAKER_01: And so what do you tell what do you tell sellers right now when it comes to positioning your property to sell, Cody?
• 19:04
  SPEAKER_01: Like what's what's the message?
• 19:06
  SPEAKER_00: Um the main message is pricing right, you know.
• 19:09
  SPEAKER_00: That's gonna be the biggest determining factor of whether you're building sales or not.
• 19:14
  SPEAKER_00: And then um beyond that, like you were mentioning, there's things that you can do to make your property more attractive to a potential buyer.
• 19:22
  SPEAKER_00: So delivering a unit vacant helps a ton.
• 19:25
  SPEAKER_00: Um, it opens up options for owner occupants to come and occupy that unit and use, you know, low money down owner-occupied financing.
• 19:33
  SPEAKER_00: Um condition makes a big difference, curb appeal makes a big difference.
• 19:37
  SPEAKER_00: So um, you know, painting the outside if the building isn't looking good, increasing rents if you can, and really just trying to make the numbers look as good as you can.
• 19:48
  SPEAKER_01: Yeah, I know that's really, really good advice.
• 19:50
  SPEAKER_01: If any sellers are out there in Southern California and they would like to have Cody and I come out and just do a uh just kind of like a brief analysis and just give you guys some guidance that we we would love to have that opportunity.
• 20:05
  SPEAKER_01: It we can help you position your property to sell at the price in terms that are acceptable to you.
• 20:12
  SPEAKER_01: And we don't have to rush into it.
• 20:14
  SPEAKER_01: Things, depending on timing, things could could change.
• 20:18
  SPEAKER_01: And um and and I say timey because if you if if we're not in a rush and if we have a little bit of time, there's certain things that we could help you do.
• 20:27
  SPEAKER_01: And sometimes it takes months to get to that point to be able to get the right things in place.
• 20:32
  SPEAKER_01: So my buddy called me and his insurance went up by$400.
• 20:35
  SPEAKER_01: Now, this is just for a small building.
• 20:37
  SPEAKER_01: Obviously, we're getting we're getting other people calling us, and you know, they have larger 12, 20 unit buildings, and they're calling us for referrals.
• 20:45
  SPEAKER_01: Hey, who's who's insurance out there?
• 20:48
  SPEAKER_01: Um, what are you seeing out there with some of the folks you work with?
• 20:52
  SPEAKER_00: Yeah, insurance is tough, and it's been um difficult, you know, with every escrow that we've done.
• 20:58
  SPEAKER_00: Um, the big insurance carriers can no longer make money in California because there's a state insurance board that doesn't allow them to increase rates at the rate that they need to.
• 21:09
  SPEAKER_00: So a lot of these big carriers have left.
• 21:11
  SPEAKER_00: So, you know, if you have farmers insurance, mercury, um, there's a few others, like a lot of these people have policies on buildings in California still.
• 21:20
  SPEAKER_00: And when those policies are coming up for renewal, they're not renewing them.
• 21:24
  SPEAKER_00: So people are having to switch, right?
• 21:26
  SPEAKER_00: So um there's there's a secondary line, it's called excess and surplus lines that most people are going with now.
• 21:34
  SPEAKER_00: Uh those lines are more expensive, and insurance companies are being more picky about your major systems.
• 21:41
  SPEAKER_00: So they want to see that the roof, the plumbing, the electrical, um, you know, the heaters have all been updated within the last 25 years.
• 21:49
  SPEAKER_00: If you have any recalled electric panels, they're requiring you to upgrade those.
• 21:54
  SPEAKER_00: Um, you know, within a certain amount of time, it's usually 30 or 60 days of you know, buying.
• 22:00
  SPEAKER_00: That policy for you.
• 22:01
  SPEAKER_00: And it's not cheap to do that stuff.
• 22:03
  SPEAKER_00: Like average, I'm seeing is five to seven thousand dollars to upgrade like the main electric panel.
• 22:11
  SPEAKER_00: So if you have a four-unit building, you're looking at twenty to twenty-eight thousand dollars in just costs for that.
• 22:18
  SPEAKER_01: So, so Cody, to to kind of uh bring this full circle, we have we talked about the balcony inspection, which could lead to balcony work, right?
• 22:28
  SPEAKER_01: Um insurance has been going up, and insurance might require you to upgrade the panels in order for them to continue insuring it or to secure the new insurance, and then that premium has gone up.
• 22:38
  SPEAKER_01: Uh it's getting difficult, it's getting more and more difficult to own units out there.
• 22:43
  SPEAKER_00: It really is, yeah.
• 22:44
  SPEAKER_01: And so why let me play dev devil's advocate here is why would someone continue to want to own in California?
• 22:54
  SPEAKER_00: I think you know, the the economics still make sense over the long term.
• 22:59
  SPEAKER_00: There's always going to be ebbs and flow, ebbs and flows in a market.
• 23:02
  SPEAKER_00: And I think, you know, California with the illimit the limited amount of land and the huge amount of demand from people to live here, um, you know, that that supply and demand mismatch is going to allow properties to appreciate over time.
• 23:19
  SPEAKER_00: And, you know, if you can get through these these tough times, I think you're going to do really well long term.
• 23:25
  SPEAKER_00: So um I always tell people just make sure you're you're looking 10 years into the future, not one year, two years, you know, because real estate really is a long-term investment, and that's where you make the your money.
• 23:37
  SPEAKER_01: Um I've shared this in the past, and and my mentor, Mark Milan, said that real estate, it's um it's not get rich quick, it's get rich guaranteed.
• 23:46
  SPEAKER_01: Um, but part of that guarantee, Cody, is is long-term ownership, which we believe in.
• 23:51
  SPEAKER_01: We've never said this was going to be easy and you're not gonna make it overnight, but in the long run, um, it's still gonna be a terrific investment.
• 23:59
  SPEAKER_01: And I think both you and I are actively looking at deals for for for ourselves and together.
• 24:04
  SPEAKER_01: And and um so you so for those people listening, like you know, people like Cody and I, we're we're in the business, we're real estate brokers, and we're actively looking and so many offers ourselves.
• 24:14
  SPEAKER_01: And so let that be a testament to what we believe is gonna, you know, kind of remain.
• 24:19
  SPEAKER_01: Yes, it's difficult, but we still believe that this is the best vehicle to to build wealth.
• 24:23
  SPEAKER_01: Cody, I want to thank you.
• 24:24
  SPEAKER_01: I know you got to get going your next appointment.
• 24:26
  SPEAKER_01: I I do want you to um, if people want to get a hold of you, Cody, um, you have your YouTube channel.
• 24:32
  SPEAKER_01: What's what's the best way for people to get a hold of you?
• 24:34
  SPEAKER_00: Um, you can check out my YouTube channel.
• 24:36
  SPEAKER_00: It's um just my name, Cody Charnell.
• 24:39
  SPEAKER_00: Uh, or you can go to the Sage website.
• 24:41
  SPEAKER_00: My contact contact info is all there.
• 24:43
  SPEAKER_00: Um, but yeah, I'd love to to talk with you and strategize and help you on your real estate journey.
• 24:48
  SPEAKER_01: We're gonna we're gonna continually have Cody back more and more.
• 24:51
  SPEAKER_01: I I love his input, the way he looks at the um at the properties, he's terrific with analyzing properties.
• 24:57
  SPEAKER_01: And and so for me, I I enjoy just asking him questions and we kind of go back and forth.
• 25:01
  SPEAKER_01: And so um, I'm gonna try to as a benefit to to to our our our viewers, to our listeners, is kind of bring those conversations that we're having here at the office into the studio so they could kind of hear how we interact and um and just as we both seek to not only build wealth, but just to kind of um kind of um help each other grow in in the world of real estate and everything else.
• 25:25
  SPEAKER_01: So I appreciate uh you, Cody, and thanks for being on today.
• 25:28
  SPEAKER_01: Awesome.
• 25:28
  SPEAKER_01: Thanks for having me.
• 25:29
  SPEAKER_01: Cool.