Video Closed Captioning:
good morning good afternoon good evening
folks michael super onerous atlanta time
back with his good friend friend of the
channel mr jonathan twomley how you
doing sir i’m doing great michael how
are you i’m doing well one of the things
i love to do with you is kind of just we
we’re in the business of real estate we
play at different levels you’re big i’m
small
uh meaning residential versus commercial
and sometimes i just like to share the
nuttiness of california
you ready for this yep
so california our lovely socialist
governor and
assembly people or whatever they’re
called i just call him king newsom
because he’s acting like a king because
he’s got all these special powers
because we’re an emergency always in an
emergency so he’s king king newsom
uh he now has decided that uh house
flipping uh is causing uh the housing uh
crisis in california
so he now wants to go after house
flippers and again
uh hit them with more taxes so i thought
i would bring this article up it is
currently just a proposal but it shows
how nutty that king
king newsom is here we go
all right so
let me minimize this window a little bit
so go away
here we go
so again assembly bill would tax house
flippers so again it’s focused on them
who sell houses in less than three years
and get this they’re going to tax them
25
an additional
25
for any house that’s sold bought and
sold in under three years
this this
this is uh
this is wild
how
okay so my first question is how do they
propose to distinguish people who
flip a house
in three years from someone who
buys a house and then has to sell it for
some reason so i’m sure they they have
it this is just a proposal they’re just
trying to get everybody fired up because
housing is so unaffordable i’m sure it’s
going to be multiple sales multiple
transactions right
yeah i mean well look uh so i mean one
thing i do want to point out is you know
the
the um
maybe this doesn’t really apply to
house flippers
uh that much but when the
the trump uh tax
reform went through yep one of the
things that was changed was the carried
interest yep uh treatment and it went
from one year to three years and i said
at the time that this happened that this
was going to impact
a lot of real estate investors who used
to turn over a property in
you know in under three years because
they to get
the carried interest capital gains
treatment it couldn’t just be one year
anymore it had to be three nobody really
seemed to notice that so i mean this is
sort of
similar to that right that they’re going
to what’s the tax right now so this is
in addition to the president
surcharge yeah surcharge sure targeting
so you already have crazy california tax
at 13 that’s our state yeah state tax
13.3 i think so again
so you’re gonna that’s crazy i mean so
you’re gonna pay
13 tax on flipping plus your federal tax
plus 25 percent more
gosh i mean
yeah i just think this is this is dumb i
mean like the
listen i mean
for every flipper right there’s a home
buyer on the other end correct yes so
and what the flippers are doing
is they’re taking
housing stock that’s obsolete and
they’re
rehabbing it into something
that is
yeah so
i’ve done 56 flips
uh well i haven’t done any this year i
did 56 flips in two and a half years i
promise you
not a single homeowner alive would have
bought any of the 56 homes
that i bought they wouldn’t have
qualified for lending yeah nothing i
bought would qualify for lynn so if
you’re going to do this
one of two things are going to happen
that housing stock will i bought one
house for 40 grand that i had to spend a
hundred and ten thousand dollars every
month everything was changed and yes i
sold it for 250. i made a bunch of money
it took me a year to do or nine months
that house would just fall apart
it would never it would never be back on
the tax records
it would
i mean it’s just a horrible idea i think
this is just you know this this also
reminds me of
so listen i think this is ridiculous
like like you’re taking you’re you’re
destroying
the incentive for people to upgrade the
housing stock right and
it’s the same kind of impulse
behind like banning airbnbs right and
like and i see
there are places where
you know
you’ve got towns around america like you
know like upstate new york right we have
our house where
selling to an airbnb investor may be the
only exit that a homeowner has there
because the population is is declining
right and so you’re helping people out
yeah yeah so if you’re if you’re telling
people that you’re going to ban airbnbs
because
you know it’s just it’s it’s
counterproductive that may be
an only per you know person’s only shot
to sell their house the issue is not
airbnbs or flippers
right the issue is
that
you know governments on the one hand
feel like they have to respond to the
public outcry
around the cost of housing and on the
other hand they’re not willing to take
on the real problem because that would
be pl you know exactly often because
it’s the very same people who are
complaining about the cost of housing
who also would would complain about the
solution to the cost of housing which is
just letting people build more build
build more build more densely right just
build more housing that will solve or at
least ameliorate the housing crisis
right and
problem solved but nobody wants anything
built in their backyard right
everybody
fights it like you try to build
something near
anybody i don’t care democrat republican
independent
martial in my backyard yeah from
atlantis like it doesn’t matter where
they’re where they’re from they don’t
want it built near them because
they just don’t like it right and
uh
you know that’s why we have a housing
crisis exactly it’s a supply it’s a
supply problem yeah all of those people
talking about this it’s a supply problem
and again this is not how you fix it you
don’t tax the people that are upgrading
housing stock again i want to say the 56
properties i flipped and yes i made a
bunch of money none
zero of them would have been bought by a
first-time homebuyer but all of them
were at the end and not only that but if
you’re talking about if you’re talking
about the prices that you’re talking
about right like 140 and 250 out
like 250 000 house in california is
still like an affordable house that is
installed below the meeting my meeting
is 28 385 right it is it’s a starter
it’s a starter home it’s a starter home
right and you are actually you’re
actually
creating more homes right more
absolutely i’m taking something
unlivable unlivable because obsolescence
right destroy is part of the housing
supply every year and
you know
this is this is part of housing stock is
constantly being aged out and if people
are not
given the incentive to rehab it to fix
it up it’s it’s just as bad as not
constructing new property right
at least you’re maintaining the the
existing number of years i would say
it’s worse because you’re losing the
body you’re losing the first-time
homeowner yeah and this is why as i have
discovered something i didn’t realize
right is that even in some of these
rural markets around the country where
the population is declining they still
have a housing crisis exactly how crazy
is that crazy it’s crazy because because
the housing stock is lowering stock is
the housing stock is becoming obsolete
faster than the population is declining
and on top of it and you were talking
about the supply issue not just the
supply issue
what
you know
the federal so as
at the same time that state and local
governments are restricting the amount
of housing that’s available the federal
government is juicing this the demand
for it by lowering interest rates all
the time right just wait for first-time
homebuyer programs wait for the 40-year
mortgage
yeah it says supply problems demanded
supply is undefeated it is a supply
problem so if you you know and and if
you and i’ve said this before i mean
the
the places around the country that are
kind of like
everyone’s looking at is though this is
like some kind of nirvana of cheap
housing
basically what they have there is cheap
land right
like they have cheap land that hasn’t
been built on yeah and also zoning
that’s not as rigid but even listen even
in the zoning is the zoning follows
correct the building right so
this is the way that this plays out and
this is how it’s played out everywhere
in the early stages
this happened this happened in you know
new york it happened in california the
places that people point at as being
like the horrible places to invest
this happened
it’s going to happen in texas too just
maybe you and i won’t be alive when it
does but just telling you what’s coming
right
developer people started they wanted to
buy they lived in the cities
they you know people moved to the
suburbs right so whatever is you have
people moving to an area right they want
to live there developers buy
farmland right it’s unzoned you can
build whatever you want on it right on
farmland yeah they buy they buy farmland
you can
do it whatever you want they build it
right
then what happens well that gets filled
up they buy the next farm and they buy
the next farm until you get to the point
where you’re too far to commute and that
and it stops
what happens to all that stuff that gets
built well every single person who buys
that single family
you know cape cod you know house wants
to make sure that that neighborhood
stays exactly the way it is or the
builders even built in deed restrictions
to make sure that you can’t change it
right because that’s part of like their
marketing their selling point like it’ll
never it’ll always be like this forever
you’re buying
you’re stopping the clock
in this part of the world right and so
and then
then they’re stuck and you’re stuck with
that for generations right so you have a
place like like texas it has like vast
it’s a huge state there’s vast amounts
of you know open land there’s land
everywhere yeah but
california was once like that california
is also a huge state and then what
happened the population exploded right
it did right so
texas you’re seeing it already right the
the the cities
are zoning all those places that had no
zoning now that people live there what
do people want they want to make sure
that it will never change from what they
bought into right so
you were just going to have the same
problem there it’s just it’s just behind
by several decades right so correct so
you know so now’s the opportunity right
get in there while you can but the thing
is you know when you talk about
that concept of like people want to buy
property where there’s barriers to entry
right they want to buy infill like
there’s a whole a lot of people who buy
this what they do they want to buy
they want to buy a place like california
or new york precisely because
the housing supply is locked in and with
that dynamic of rising demand and
stagnant supply they know it’s going to
go up right so
that’s kind of like now you can get in
early on that in places like texas but
the same thing is going to happen it’s
just you’re going to wind up with this
unless
like as a country we
make a different decision which is that
we we value
you know
basically the the pre-world war ii
idea
of what
of their ship there being a free market
in in housing right like that with no
zoning
you know as the city gets more dense you
go vertical right and like manhattan
think about manhattan
man there will never be another
manhattan right because
it can’t happen right you can’t have
that dynamic of like starting out with
farms and then single-family houses and
then row houses and then small apartment
buildings and then giant apartment
buildings because
the zoning because it’ll be locked in
like one acre lots
for the rest of human history unless
unless we have the political will to
like address this issue right so which i
don’t think we will so yes i just want
to i want to kind of close this out with
what i would do again it’s just a
proposal uh knowing king newsome this is
going to happen
but let’s just take the 56 homes that i
bought upgraded turned into quality
below median
i i actually went because i knew i was
going to talk about this today uh i
would have gone back and i probably
still would have bought 45 or 46 of them
i just would have kept them
i just would have made them rentals
yeah right i would have put the debt
structure in place i had the capital do
the deals so again of the 56 i still buy
46 they just don’t go to first-time home
buyers yeah they say rentals or at least
for three years right at least for three
years well one once our rental for me
they’re gonna be a rental until it’s
unaffordable and then i’ll 1031 into
apartments so again this doesn’t fix the
problem yeah it is a supply problem not
a demand yeah it’s it is uh it is a
problem
you know
politicians have to do something right
there the pressure is on them to do
something people elect them and they
want to point at somebody else and not
themselves right and so and so they well
also frankly they don’t want to point
the finger back at the voters either
because that’s not that’s not like yeah
every time you turn up certainly not a
good idea yeah every time you turn
around into the voters and say actually
this is your
like you created this problem yeah right
uh that does that’s not a good way to
get reelected so they don’t do it right
so they you know they point the finger
at the at the bad guys the landlords or
whatever it is instead right so yeah so
again what i think happens with
something like this if it gets approved
and again and again i see every reason
king newsome would make this happen is
we would see
less first-time home buyers which is
exactly what they’re trying to do again
first-time homebuyers will not qualify
to buy what most flippers upgrade it
just won’t happen yeah and you you also
you know you want to be wary of
creating a dynamic like say for instance
rent control in new york city yeah right
has has created
a dynamic where
you can’t build anything that’s that has
affordable rents because you don’t want
to get trapped into the rent control
regime so you only build luxury right
exactly and and
also the costs are so high anyway that
you only build luxury right and that’s
that’s kind of a problem around the
country actually with high construction
costs is you you know
the the additional cost to build luxury
is not
you know like just the cost benefit of
like going luxury because you get so
much more profit right and and so
because of the the cost of it and
if you’re going to raise the cost of
flipping
then probably what will happen is you’ll
wind up with people upgrading to an even
higher standard right and the houses
will become more expensive because they
got to make up the taxes that they’re
losing yeah right and they can do that
with a higher price you know even though
they’re going to pay a little
percentage-wise more tax yeah you know
they’re going to be making 75 they’ll
make 75 cents on the dollar by going
more expensive right and offset that so
that their after tax dollar profit is
the same and they do that by upgrading
to a higher standard and making it less
affordable all that’s going to happen is
affordable housing is going to go down
you’re going to have some housing stock
just go to zero because you can’t save
it you’re gonna have other housing stock
upgraded and become rentals doesn’t fix
a problem and then to your point the
last one is some people upgrade and take
it right to the top
and you’re you are going to do nothing
except hurt first-time homebuyers with
this but again
king newsome likes to be king so i
suspect this will happen jonathan where
can people find you
so uh one place to go is the
multi-family investment community on
facebook where we can continue to talk
about these issues online uh you can
also if you would like to learn how to
actually buy apartment buildings the
right way uh you can go to
multifamilylaunchpad.org
join and you can see how to join my
program and the last thing uh is if you
would like to invest with me we do have
deals ongoing
and if you were an accredited investor
of course
and you can google my company two
bridges asset management
and then
you just you know google us that’s the
easiest way to find us and fill out the
investor form do yourself a favor folks
do all three of those things figure out
how to buy apartments it’s a great thing
uh look at his deals if you’re an
accredited investor and you have to be
in his facebook group but it’s something
i go to almost every day so thanks
jonathan cool thanks michael