Yeah, Graham's recent moves make a lot of sense if you’ve lived through California’s real estate and regulatory gauntlet long enough.
Myself Surviving the ‘90s crash and 2008… and apparently the only way to get a city building department to move is to go full scorched-earth 😂
Back in the day, second bogus inspection and I’d go lawsuit mode:
- Sue the inspector personally
- Sue his boss
- Sue the whole department
- Drop liens on every utility line into my property include them also.
- File prejudgment remedies attachments on their trucks and office furniture also personal properties.
Best part? Getting the inspector’s spouse served at home. Phone rings:
“Why are you suing my husband?!”
Me: “Let me check my calendar and get back to you” 🤣
Only had to do it a couple times. After that, permits and variances sailed through like I was the mayor’s cousin.
New generation: it’s time to have option B to lay the smackdown again. A lot of these inspectors see young investors killing it and get jealous—they wish they had the balls to flip or build wealth like you. So they flex, act like they’re your boss, and red-tag everything just because they can.
Nah. Remind them who actually pays their salary. Some lessons still need to be taught… and re-taught.
Horror stories like this abound in the Seattle area. Recently, a friend tried to permit the relocation of a small gravel driveway on their own rural multi-acre property. The county took about 9 months to finish the pre-permitting process, then charged $12k to do the "real" permitting process. That took several months of back and forth. Each time, a permitting person would offer a "deal" (change ____ in the design, give the county wetland designation in some unrelated area, put a weird easement on the property, etc, and it'll be good) and each time it was fixed, the permitting person who had offered the deal was gone and the next person required a new set of changes.
In the end, my friend had to bail on the project because the permit was going to get dropped for going back and forth "too many times" (even though in each case, he was directly addressing what the county had asked for).
The county recently added a new rule that if a permit application goes back and forth "too many times" (whatever that means, and it also counts the times when you fixed what they said to fix), they will auto cancel the application. Then the applicant has to start over, waiting 9+ months in pre-permitting and paying another $12k for a real permit application.
Another thing my friend told me is that county permitting agents are scored based on _how many times they pick up a file_. It's beneficial to their career to send a permit application back multiple times with B.S. commentary on it, even if it was perfect in the first place, so that's what they do.
In my opinion, you are thinking about the existing situation all wrong. I’ve been a commercial real estate investor and developer my whole business career (40+ yrs) for both major institutions (25 yrs) and with my own company (15yrs).
Unfortunately, the issues you experienced in LA are more common than you’d care to believe throughout the US. Development used to be my preference but I avoid it entirely for the reasons you described. The bureaucratic establishment feeds on creating work for itself and has no concern for the customer’s (i.e. property owner’s) time or money. I’ve watched neighborhood commissions tell people what architect they needed to use and what type of shingle (slate) had to be on the alley-facing side of a house when no other home had similar shingles.
Anyway, the point is, if the bureaucratic establishment is making it more and more difficult to build new properties, it is creating artificial barriers to new development for housing. As bad as that is for people seeking dwelling units, restricted supply adds value to those units that already exist. My personal preference is that the bureaucrats facilitate vs impede new housing but their actions make owning the units you already have more valuable over time, not less.
That tells you as an investor, to buy existing and keep the units up so that you don’t put yourself in the crosshairs of the local building depts.
For what it’s worth, I buy older industrial bldgs that lease to local companies. They are too expensive to build new so supply is naturally muted vs caused by gov’t ineptitude. That said, I do what you do, I buy older stuff, clean it up and keep it affordable for the lessees who very much appreciate coming to work in a property that looks and functions well. So they renew and we all win.
You can still do right by your tenants with your properties and make a great living despite the bureaucratic ineptitude related to major construction/development projects by staying out of the new build game. Food for thought. Good luck.
For a minute I thought if I was reading about India because this is exactly what happens here with a caveat that one must bribe to get through this. Are they rent seeking for giving the services? Very strange.
This sounds very specific to the City of Los Angeles itself and problems than can pop up in any large city where the departments are so large that people don't hold each other accountable, because they don't know each other. (I'm saying the is a former city staff from Texas.) Fortunately there are LOTS of other municipalities in California which need additional housing units.
Great video!
Yeah, Graham's recent moves make a lot of sense if you’ve lived through California’s real estate and regulatory gauntlet long enough.
Myself Surviving the ‘90s crash and 2008… and apparently the only way to get a city building department to move is to go full scorched-earth 😂
Back in the day, second bogus inspection and I’d go lawsuit mode:
- Sue the inspector personally
- Sue his boss
- Sue the whole department
- Drop liens on every utility line into my property include them also.
- File prejudgment remedies attachments on their trucks and office furniture also personal properties.
Best part? Getting the inspector’s spouse served at home. Phone rings:
“Why are you suing my husband?!”
Me: “Let me check my calendar and get back to you” 🤣
Only had to do it a couple times. After that, permits and variances sailed through like I was the mayor’s cousin.
New generation: it’s time to have option B to lay the smackdown again. A lot of these inspectors see young investors killing it and get jealous—they wish they had the balls to flip or build wealth like you. So they flex, act like they’re your boss, and red-tag everything just because they can.
Nah. Remind them who actually pays their salary. Some lessons still need to be taught… and re-taught.
The war never ended. 🔥
I'm sorry but I had to laugh when I got to the part about the urban forestry department. haha.
Life will be a lot smoother once you leave Big Government California.
Horror stories like this abound in the Seattle area. Recently, a friend tried to permit the relocation of a small gravel driveway on their own rural multi-acre property. The county took about 9 months to finish the pre-permitting process, then charged $12k to do the "real" permitting process. That took several months of back and forth. Each time, a permitting person would offer a "deal" (change ____ in the design, give the county wetland designation in some unrelated area, put a weird easement on the property, etc, and it'll be good) and each time it was fixed, the permitting person who had offered the deal was gone and the next person required a new set of changes.
In the end, my friend had to bail on the project because the permit was going to get dropped for going back and forth "too many times" (even though in each case, he was directly addressing what the county had asked for).
The county recently added a new rule that if a permit application goes back and forth "too many times" (whatever that means, and it also counts the times when you fixed what they said to fix), they will auto cancel the application. Then the applicant has to start over, waiting 9+ months in pre-permitting and paying another $12k for a real permit application.
Another thing my friend told me is that county permitting agents are scored based on _how many times they pick up a file_. It's beneficial to their career to send a permit application back multiple times with B.S. commentary on it, even if it was perfect in the first place, so that's what they do.
In my opinion, you are thinking about the existing situation all wrong. I’ve been a commercial real estate investor and developer my whole business career (40+ yrs) for both major institutions (25 yrs) and with my own company (15yrs).
Unfortunately, the issues you experienced in LA are more common than you’d care to believe throughout the US. Development used to be my preference but I avoid it entirely for the reasons you described. The bureaucratic establishment feeds on creating work for itself and has no concern for the customer’s (i.e. property owner’s) time or money. I’ve watched neighborhood commissions tell people what architect they needed to use and what type of shingle (slate) had to be on the alley-facing side of a house when no other home had similar shingles.
Anyway, the point is, if the bureaucratic establishment is making it more and more difficult to build new properties, it is creating artificial barriers to new development for housing. As bad as that is for people seeking dwelling units, restricted supply adds value to those units that already exist. My personal preference is that the bureaucrats facilitate vs impede new housing but their actions make owning the units you already have more valuable over time, not less.
That tells you as an investor, to buy existing and keep the units up so that you don’t put yourself in the crosshairs of the local building depts.
For what it’s worth, I buy older industrial bldgs that lease to local companies. They are too expensive to build new so supply is naturally muted vs caused by gov’t ineptitude. That said, I do what you do, I buy older stuff, clean it up and keep it affordable for the lessees who very much appreciate coming to work in a property that looks and functions well. So they renew and we all win.
You can still do right by your tenants with your properties and make a great living despite the bureaucratic ineptitude related to major construction/development projects by staying out of the new build game. Food for thought. Good luck.
My uncle did home additions in LA for many years and he eventually gave up dealing with the city and permits. He said it was always a nightmare.
Yes, you “ have” been deceived. One of your neighbors has “pull” down at city hall.
For a minute I thought if I was reading about India because this is exactly what happens here with a caveat that one must bribe to get through this. Are they rent seeking for giving the services? Very strange.
A related article came on my radar today. https://rein.pk/over-regulation-is-doubling-the-cost
Graham, I am 70 and I have gotten my son who is your age to follow you on all your sites.
I do not want to overstep any boundaries, but your parents and all your connection must be extremely proud of you.
You my young man have become a mentor to millions.
Thank you for educating, calming and most importantly for sharing your wealth of experience and knowledge.
Best regards and a very HAPPY THANKSGIVING!
Stuart Ellison
PS. I f you think LA is problematic, come try in NYC.
I love this!! Would love your thoughts on some of my stuff!! Follow me back I could DM you?
Very entertaining read. You always hear about what a struggle it is for private developers in LA but this really puts it into perspective.
This sounds very specific to the City of Los Angeles itself and problems than can pop up in any large city where the departments are so large that people don't hold each other accountable, because they don't know each other. (I'm saying the is a former city staff from Texas.) Fortunately there are LOTS of other municipalities in California which need additional housing units.