Real Wealth Show: Real Estate Investing Podcast

The housing market has never been so competitive. Buyers are going head to head in bidding wars and trying to out-do one another with concessions. But when it comes to buyers that need financing and ones who offer cash, sellers often choose cash because it's quick and easy. In this episode, you'll hear from NerdWallet's Holden Lewis who talks about what borrowers can do to give themselves a fighting chance against cash buyers. Holden has reported on mortgages since 2001, working through a housing boom, the Great Recession, and the long recovery. He's also NerdWallet's authority on mortgages and real estate, and the former president of the National Association of Real Estate Editors. He's won various writing awards, and is rehabbing his Mom's house! He'll share some of his tips for people with loans and what they can do to make their offers more attractive to sellers. Join RealWealth today at realwealthshow.com to find out how to build wealth with new and renovated single-family rentals. Membership is free, and will give you access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you! TRANSCRIPT: [music] Rich Fettke: [00:00:00] You're listening to The Real Wealth Show with Kathy Fettke, the real estate investor's resource. Kathy Fettke: The US housing market may never have been quite as competitive as it is today. Buyers are going head to head in bidding wars and trying to outdo one another with concessions, but when it comes to a buyer that needs financing and those who offer cash, sellers often choose cash because it's quick and easy. In this episode of The Real Wealth Show, you'll hear from NerdWallet's Holden Lewis, who talks about what borrowers can do to give themselves a fighting chance against cash buyers. I'm Kathy Fettke and welcome to The Real Wealth Show. Holden has reported on mortgages since 2001, working through a housing boom, the great recession, and the long recovery. He's also NerdWallet's authority on mortgages and real estate. On today's show, he's going to share some of his tips for people with loans and what they can do to make their offers more attractive to sellers. Holden, welcome to The Real Wealth Show. Holden Lewis: Hey, nice to be here. Kathy: I think we've heard your company's name in the news quite a lot, so it's really an honor to have you here. Let's talk a little bit about the, first of all, what your company does. What is NerdWallet? Holden: NerdWallet, well, it's a financial marketplace where you can go to find mortgages, credit cards, that kind of thing, plus lots and lots of personal finance information from dozens of reporters. I'm one of them. Kathy: Okay, wonderful. It's interesting because there's a lot of talk about not going into debt. There are authorities out there, Dave Ramsey for one, that says don't go in debt. What are your thoughts on that? Holden: There are some kinds of debt that are just perfectly fine to go into. Student loans, mortgages, I think that those are fine. I think a lot of times credit cards are [00:02:00] a perfectly good way to spend your money. I think about when I was in my early 20s and if I had an $800 car repair, I didn't have that kind of cash. I had to put it on a credit card. Well, there's nothing wrong with going into debt to fix your car so you can drive it to work. I think there's a lot of places where debt has a place. Kathy: Sure. I know I lived in Switzerland as an exchange student when I was, oh my goodness, 17 years old. My Swiss mom basically said, oh, no, we never use debt. We just save for everything. If we're going to buy a new car, we just save now and buy it with all cash. It's a little bit of a different mentality maybe today in Switzerland, but certainly in the US that if you can borrow at low-interest rates, it might make more sense, especially if whatever it is you're buying, can you money. Let's take that example. Let's say you get a car loan and buy a car, but you use that car for work. Maybe you're even an Uber driver or something and you make more money than the payment. Well, then that's a positive cash flow, right? Holden: That's right. That's right, and you can expand that to all sorts of things. When people have the opportunity to pay off their mortgage quickly, like make double payments or something like that, one of the things that they have to consider is this, like what if they're paying 3% interest on that mortgage and they can invest the money and make say, a 5% return. That's not a whole lot more than that 3% they're paying on the mortgage. Well, maybe you don't want to make extra payments on your mortgage if, instead of getting that 3% return forgetting taxes, on paying your mortgage early, you can make a 5% return on an investment. [00:04:00] Kathy: I just saw a Facebook post, somebody saying, "I'm so proud of myself, I just finally paid off my home," and I understand that's a great feeling I'm sure for people to feel like I live in this home, I have no payments. I basically live here for free besides taxes and insurance and repairs which are still costly, right? It still costs to live in a home even if you've got it paid off, but let's say that home is $200,000. That's $200,000 that could be borrowed against at super-low interest rates and reinvested for more. Some people, again, possibly Dave Ramsey, would say that that would be irresponsible to get a loan against your primary. Again, that would be, if you're going to just go spend it on non-assets, on a vacation, or something, but if you're investing it for more than you're paying to borrow it, it could accelerate the payoff in a way, right? Holden: That's exactly right. I think about what happened in the run-up to the housing crisis in my neighborhood, there were people who kept refinancing their homes and borrowing more and more and more and buying. Like I had a neighbor who bought a Volkswagen Tiguan and a Harley Davidson. Well, neither one of those is really going to appreciate value. If you're using your home equity to pay for those things and the price of the house is inflated and eventually falls, you're in real trouble if you lose your job. The way I look at it is this, there's a psychological wage to being in debt. When you can pay off [00:06:00] your student loans and your mortgage and your car loan, and it just makes you sleep better at night. Perhaps it's worth it, perhaps it's better to just not have those debts rather than say, get a HELOC and invest the proceeds of the HELOC. You might feel like you're walking on a tight rope when you do something like that and you just want to maybe simplify. I totally understand. There's a lot of things I disagree with Dave Ramsey on, but sometimes I end up in the same place where he is when I just think in terms of peace of mind. Not having debt gives you peace of mind. Kathy: Sure, sure. The bottom line is if you know how to invest and you're savvy at it, and you could get a loan for 3% and you are 99.9% sure that you can get an 8% return elsewhere or 10% or 15% or 20% then, by all means, you would get that money and borrow as much as you could. You would borrow millions upon millions upon millions beyond your home. You'd use credit cards and so forth because you would know how to make a nice return on that money. It's like if you didn't know how to do that, then it would be like the idea of walking into a casino and saying, okay, I've got a $100. I'm going to gamble and maybe I will make another $100 and keep the $100 I started with and only play with the house money, but what if you don't? What if you lose $100 completely? It doesn't work. If you're going to gamble, you need to know how. You need to know that you're going to walk out of that casino winning. With real estate or with other investments that you understand, It's not so risky if you really get it, if you really understand it. If you know how to buy a house, understand what it [00:08:00] takes to renovate that house, what the after repair value will be, what the market is asking for, and the demand, and if you've done it before or working with someone who has, you have a pretty good chance of making that work. If somebody wanted to pay off their debts or just be sitting in cash, what advantage do they have as a cash buyer? Holden: There's a lot of advantages to being a cash buyer and really, first, you have to think in terms of the mentality of the seller. Why would the seller want to sell to a cash buyer? Among those things are as a seller, you don't have to wait for the buyer's mortgage lenders' approval or their timing. You don't have to worry about the appraisal, and you're just simply more likely to go to closing. When you turn that around, you think, okay, as a cash buyer, those are some of my advantages. It's a more sure closing because as a cash buyer, I'm not having to depend upon a mortgage lender's approval or quirks of timing where suddenly, oh, they have to put the closing off for a week. Don't need an appraisal and you're just simply more likely to go to closing. Kathy: That happened to us with our daughter when she was 24 and she had had a two-year work experience so she could qualify for a loan. I've talked about this before on the show. She was going to go buy a car because she finally had good credit. Well, she had great credit and showing income. I said, no, no, no, before you get that payment and throw off [00:10:00] your debt to income ratios, look at buying a house first. She was like, a house, how can I do that? How can I afford that? Just talk to a lender and find out if you can qualify. It turns out she could qualify for about a $300,000 house. She lived in Chico, California where $300,000 houses were actually available. It's pretty tough to do- Holden: Oh, really? Kathy: -out in California, but she could. She started shopping and was able to find houses that were three-bedroom homes that were cheaper than the apartment she was renting that was a two-bedroom with no yard. The light bulb went on and she got it. She found a really good deal on a beautiful house next to Bidwell Park, looking over the park and just riding bike distance to downtown and to her job. It was a former rehab that the person couldn't finish, so one of the bathrooms wasn't done and a bank wouldn't lend on it. The only people who could buy that property would have to come in with cash. Well, that obviously lowers the value. We said, fine, you can borrow from our retirement savings, it's going to cost you 6%. Then you can refi, we'll buy it all cash and then you fixed the bathroom and refi, that's what she did. That was an example of why having cash or someone who has cash can really help you get a great deal. She got that property for at least $50,000 under market because of the unfinished bathroom. She fixed the bathroom for about $5,000 and lived in that property for a couple of years, just sold it, and after paying us back and all the interest, she made over $100,000. That's pretty good to live for free basically as a 24-year-old and make money at it at the same time. Holden: That's a happy story for her. It sounds like a horror story for that seller. It's like, all they had to do was [00:12:00] invest $5,000 to essentially get a $50,000 return and they didn't do it. Kathy: They didn't do it. Oh, that is a really good point I hadn't thought about that. This was somebody who just, maybe hadn't calculated the cost of repairs and literally spent all their money and didn't finish the project. This is not uncommon and that's why, when you try to do a flip, you better make sure you know the cost and have reserves in place because there's always surprises with old properties. There could be things that you can't see until you start digging into that property and making those changes. Unfortunately, I do believe they just ran out of money because they had spent everything they had trying to do the repairs and probably couldn't get any loans. They did walk away from that probably at a big loss. Very, very important. The same thing I've seen that even with big syndications where you could syndicate, expect that the repairs on the apartment will be say $500,000, it's a much bigger deal. What if there's more to it and you need an extra million or something. If you're syndicating something big, you sure better have big reserves. You can always give investors their money back if those reserves aren't needed, but make sure you have it so you're not in a situation like that where you can't finish the renovation. With the crazy market out there, there's still a lot of people coming in with cash. What are some of the best ways to win that bid? Holden: All right. Let's say you need to get a mortgage and you're competing with these cash buyers. That can be really intimidating. Really one of the first things to do is in that intimidating situation is to present yourself as a really easygoing person, to be a not intimidating buyer. Someone who's a pleasure to work with, [00:14:00] someone whose offer is easy to accept. That's the number one thing, and then there's like elements of that. For example, when you say, make the offer easy to accept, what I mean is, keep it short and sweet and simple. Don't have a bunch of clauses in there like escalator clauses, just make it really short. Don't demand a response like within two hours, that just makes you seem like, oh, okay this person's going to be a real hard to deal with. Really just keep things really simple. Another thing is just make your best price offer right off the bat. Don't be counting on some back and forth where you're eventually going to pay more than your offer price. If it looks like there's a lot of competition for the house, you're going to have to get a mortgage, you think that there's going to be people offering cash, just make your best offer right then. Because one of the reasons is a lot of cash buyers, if they are looking to buy it as an investment to rent out, they might have a top price that is below what you're willing to pay for it if you want to live in that house. You can waive the appraisal contingency if you have enough money in reserve to pay the difference between the prices you're going to pay and the appraised value. Sometimes if you're going to get to mortgage, you can have some more flexibility, you can offer the seller a rent back. This is an important thing in today's market because it's really easy to sell a house, it's quick to sell a house. It's hard to find a house to buy [00:16:00] when you have all this competition. What happens is, people can sell a house quickly and then they might want to continue living in that house for a while while they're waiting to make an offer or close on another house. If you can offer to let them rent that house back for up to 60 days, that really might give you an edge. You can offer to buy as is and you can still have the house inspected, but you can tell the seller, look, this inspection, I'm not going to ask you to pay for anything. I'm not going to ask you to allow workers into your home to repair things and supervise them. I'm only getting an inspection to give me a yes or no, a go or no go thing. If the inspection uncovers problems that I don't want to deal with, then we'll just cancel the whole contract. If it uncovers problems that I'm willing to deal with, then we'll proceed and I'm not going to ask you to lower your price. Those are some of the strategies that mortgage borrowers can use to compete against cash buyers. Kathy: That's good information. I've read that maybe these multiple offers and multiple bids are slowing down, but I would say it's just slowing down, they're not gone and it certainly depends on the market. It's still really important to know that you're working with the right agent and that you are making the right offer because there's probably going to be some other good ones right alongside yours. Very good, all right. Any other tips in the time that you've been reporting on mortgages since 2001? Obviously mortgages are really, really cheap, right now it's cheap money. Do you see that changing? Holden: Well, they're going to continue to be low. My guess [00:18:00] is that mortgage rates are going to go up from here on. I would say, look, when you look at mortgage rates and when you make a prediction, you can predict that they're going to go up, they're going to stay about the same, or you can go down. If you can predict better than 33% of the time, you're doing pretty well and I'd say, I probably am right half the time. How sure am I that mortgage rates are going to be higher at the end of this year than they are now? Not really positive about that, but I think that that is the direction that we're going to see. The thing that could knock mortgage rates down or just keep them the same would be if the pandemic gets even worse and really drags down the economy domestically and internationally. If it's affecting supply chains even worse than they are now and shipping, you could see mortgage rates go down, I just have a hunch that that's not going to happen. That mortgage rates are going to rise but not by much. They're a little bit under 3% right now. I don't think they're going to be above 3.25% at the end of this year. I just think it's really fascinating is appraisal gaps. I mention that in passing but it's really a problem that a lot of people are dealing with, people getting mortgages. Essentially, let's say you offer $110,000 for a house and the appraiser says it's worth $100,000. Well, if you're going to buy 95% of the value of the house, suddenly you can only borrow $95,000. Instead out of putting 5% down on a $110,000 [00:20:00] house which should be $5,500, now, you're faced with putting $15,000 down. I'm throwing numbers around that might sound really confusing. Essentially, with the appraisal gap, you have to come up with cash to make up the difference between the price you're paying and the appraised value. In a normal market, what often happens is, if the appraisal comes in for less than you've offered to pay, then you'll negotiate with the seller to get a lower price. In today's market, that's just not happening. You're paying that price that you offered to pay, and you're going to somehow have to come up with that difference in cash. When you're making an offer and you need to get a mortgage, it really does help, especially if you want to waive the appraisal contingency, to have plenty of cash in reserve or easily liquidatable assets in reserve to make up that difference. Kathy: Yes. That's the challenge in a bidding war scenario. Yes, the price is going to be higher than what it would appraise for and most people who are overbidding have that cash set aside, which makes it harder for people who don't. Holden: That's right, and if you're going to waive that appraisal contingency to actually show some bank records and some brokerage records saying, look, I really can make up a difference of say $20,000 easily, if the appraisal falls short. Then just to let that seller know that, yes, you're not just blowing smoke, you really, really can make up that difference. Kathy: Yes. [00:22:00] All right. Anything else you want to let our listeners know? Holden: I think that's about all. Just to reiterate, the appraisal, not the appraisal, the flexibility about the closing date I think is really a key thing in today's market where there's just a lot of sellers out there who need to hang out in that house a little longer so they can close on the house that they're buying. [music] Kathy: Yes. Great advice. All right, Holden Lewis, thank you so much for joining me here on The Real Wealth Show and sharing your knowledge. Holden: All right, thank you. Kathy: Thank you for joining me here on The Real Wealth Show. If you'd like to get access to more free education just go to realwealthshow.com. Rich Fettke: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:23:06] [END OF AUDIO]

She’s a mother of 6, grandmother of 19, and says her claim to fame isn’t just all the green smoothies she’s made, but a real estate empire that helps pay for it all. She started investing seven years ago and says: “If a stay-at-home mom of six can do it -- so can you!” Kim Bosler says she always had a passion for real estate but lacked the confidence to do it on her own. She finally got going by networking with other real estate investors who were doing what she wanted to do. And now her adult children are following suit. They are all investing in real estate. Join RealWealth today at realwealthshow.com to find out how to build wealth with new and renovated single-family rentals. Membership is free, and will give you access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you! TRANSCRIPT Rich Fettke: [00:00:00] You're listening to The Real Wealth Show with Kathy Fettke, the real estate investor's resource. [music] Kathy Fettke: If you've been listening to me for a while, and I've been doing this a long time, you know I've interviewed some really interesting people. You might be surprised to hear me say that today is one of my all-time favorite interviews. I'm Kathy Fettke and welcome to The Real Wealth Show. Our guest today prides herself on making more green smoothies than she can even count because she has 6 kids, and 19 grandkids. She's going to share today how she's built a real estate empire, made lots of mistakes, but made even better choices over the years, and is going to share how she's done that, how she's financially free, and how she's now getting her kids investing in real estate, and wouldn't change a thing. Kim, welcome to The Real Wealth Show. I'm so excited to have you here. Kim Bosler: It's so great to see you, Kathy. I just love, really, honestly, it's because of Real Wealth Network that's given me so much. It's all because of you that I got involved in real estate, and I really can't thank you enough. Kathy: Thank you. It hasn't been all rosy, has it? You started investing with us, seven, eight years ago, something like that. Kim: Seven years ago. Kathy: It was kind of the Wild Wild West back then. There were a lot of foreclosures, the property management systems weren't really in place and we've learned a lot since then, but oh, boy. You've had ups and downs. I received a lot of emails of you being frustrated, but here you sit, in 2021 ahead, right? Tell me a little bit about that. Kim: Right. I just want to thank you for your just patience and perseverance with me, too, because we were-- I think in some ways we were learning together. [00:02:00] There was some things you just can't predict in real estate but all in all, it was just a phenomenal, it has been a phenomenal experience. It started seven years ago, really. Actually, was about 10 and I was on the plane and a friend of mine, her husband had just passed, and she had nine children, very large family. She said, "The greatest gift that Gordon gave me was, he owns five properties outright, and that allows me to go see my grandkids." She was just saying what a gift that was. I thought about that for a long time and I thought, I came home that day and I really believe in vision boards. I thought, "That's exactly what I want to create too, somehow." Her husband was also professional, but you don't have the built-in pension. You don't know how long you're going to live. There's just so many variables. I already knew that having a hard asset was something that couldn't be stolen, and it could only grow in equity. I put down on my vision board, "I would like to own six homes." [laughs] She had five, so I thought maybe six would be good and I actually started laughing. I laughed out loud when I put that down and I thought, first of all, my husband was very against real estate. We'd done some earlier in life and had not done well. We didn't really have the money to invest at that time. We still had kids at home. We have a large family, lots of grandkids like you said. Even though he owns his own dental practice in California, it's really expensive to run a practice and there's a lot of overhead. Anyway, so I put that down and we started going. I had a really good friend at the gym, and he was always talking about his investments. It was so exciting. Then one day he said, "You know Kim, I think the best thing you could do would be to just hook up with Real Wealth Network." I didn't have a pad and paper and so I was running on the treadmill next to them and I was thinking, [00:04:00] Real Wealth Network, Kathy Fettke. Okay, I went home, I looked you up, we started going to live events. It was so thrilling. One time, I got my husband to go and it was properties in Texas. At the time, she was selling she had a package of six. I said, "This is it, Bruce, let's buy these six." He said, "Are you crazy?" I said, "No, they're $120,000." Now, remember, when people hear that I bought homes for $120,000, that was seven years ago, but seven years from now is going to be seven years ago. Kathy: That's a very good way to put it. Kim: It's just never too late and even then I knew those homes had just been $80,000 and so I still thought it was paying high, but it was still at the 1%. They were renting it for $1,200, which is hard to find now even, and so we did. Kathy: You bought all six? Kim: We did, and you know what? He said, "This is your deal, because I think real estate is really risky and this is going to be your thing." I had to take out a HELOC to do it. Think about that. For $25,000 down, I only had to take out $150,000 to buy six homes. Now, where else can you get a bank? I think someday we're going to tell grandkids about this. There was a time when you could buy a home for $120,000. The bank actually will take the risk of 80%. All you have to do is 20%. It's still cash flowing, at least $500. In fact, it was a little more than because it was on land-only for a year, and they weren't taking into consideration there was a building on it yet. They guaranteed the rents too, for one year. That's when property management did things like that. They don't do that anymore. For $150,000 we owned six homes and those homes now today are worth about $250,000. That was a really, really good investment but that [00:06:00] also taught me about doing the 1031 exchanges. I didn't know what those were. She said you own the property for, try to get new builds for four to five years, and then turn it around, and you don't have to pay on the capital gains. I just thought, "You're kidding. This is--" Kathy: How can that be? Kim: Yes, just the whole thing about real estate, there just really isn't anything I have found where you can take an average American, who's not a doctor or not anything special, and you can start investing, and pretty soon, over a lifetime, you can really grow your wealth. Now, I started late, I started at age 56 and still, within this short six or seven years, I've been able to grow a very large portfolio. It started with those homes in Texas, it started actually with Real Wealth Network, because you were able to vet these people, and get the best of the best. We had a network, we had people that we could talk to, friends, we could mingle and associate, "What are you doing? What's working for you?" In fact, I have the best CPA ever, and I also found him through a podcast that you did with Real Worth Network. It's just a lot of benefits to being involved in your group Kathy, and I don't know, I wrote down the many benefits of real estate right here this top 10 reasons, and maybe I can share those, but I am so grateful. Kathy: I would love to hear that. Are you still buying? Because I think you might be. Kim: You know what, the thing is, is that once you get started, if you're doing this plan of 1031 exchanges, you actually have to keep going. That's what's exciting about it. You can stop of course, but the opportunities are just always so prevalent. It's addicting actually, and it's a lot of fun. You start getting to know different people, and they bring offers to you. I don't know, it's really exciting. Yes, the places that I'm enjoying the most [00:08:00] are thanks to Ben, he was my counselor and told me last year, to do a couple of 1031 exchanges, which I did, and bought a lot of properties in Florida. Last year was such a sweet time. I didn't even know what I was doing and I just did it. In fact, they seemed too good to be true, so I didn't really trust it. If I had known what was going to happen this last year with real estate, I would have bought a lot more of it. Kathy: How many did you buy? Kim: Everybody would have. We bought eight in Florida. Kathy: Oh my gosh. That's amazing. Then there were some areas that were more difficult and some that you-- which is again, the nice thing about real estate, especially one to four unit homes that can be sold fairly easily if you're in the right area. There were a couple in Chicago that were more difficult. Why is that? There's a lot to it, but maybe just a couple of things you would have done differently. Kim: Well, just really briefly, I actually went on a home tour that Real Wealth put out. I went with Ben actually and we-- it was an incredible company, Mack was, and they just happened to go bankrupt. I don't know why but I know- Kathy: I think they over-leveraged. Kim: Probably, and we saw that. I was actually the one that noticed it because we weren't getting paid for four months. I looked up online and the news had just broken that day, I think. I emailed all my friends in Real Wealth and that was a little bit of a challenge, but it was something that was overcome, we could overcome, for sure. As I mentioned before, each one of those properties has still gone up in value. I actually made a lot of money on the home that I just sold in Chicago, and I have just three more to go, but I've got great tenants. They're all paying rent and one of them I had to put some money into. That was probably my [00:10:00] only bad property, was one in Chicago, where a tenant pretty much destroyed the place. Interestingly, if you've got a large portfolio, that's the advantage of it, because you've got other properties that nothing's really coming out of your own pocket, so to say. Kathy: If you really go into it like a business, and with any business, if you're going to be hiring employees, you need to have reserves, because what if you have a bad month? The employees don't get paid and you don't have a business. Any business, you've got to have enough reserves, usually 6 months, maybe 12 months. When you know these things can happen, and you've got the reserve set aside, it's just a business expense, and it's non-emotional. Kim: It feels non-emotional to me. What it feels like to me, because we don't really spend the money right now, is it feels like a giant Monopoly game. That was my favorite game when I was a kid. We used to stay up for hours and play it all night and sleepovers. I just loved Monopoly. That's what it feels like. Sometimes, there's something bad that'll happen and you go, "Okay, well, I've got this thing. I'm going to pass Go pretty soon." Go is payday when you're-- it automatically goes into your account if you've got good property management. That's really key is great property management, which I have really been blessed to have in areas. Chicago, I go through a few, but I don't regret anything. In fact, I have to tell a story about you, Kathy, that just shows your integrity. When I first got involved with Real Wealth, I know you already know what's coming, but there was a guy on your site that was only on there for maybe five days, until you realize, "Wait, this is--" Kathy: Until I bought a property from him, and realized it was a mistake. Kim: He sold me a property for $54,000 in Philadelphia and it was cash. I was so excited [00:12:00] about my first property. We went out there and he said, "You don't need to do an appraisal, anything like that. It's all great. You don't need to do an inspection." I was just really too trustworthy. Anyway, we went out and found out that it was a real disaster. Kathy, I still can't believe this, but you bought the property from me. Kathy: I still have that thing. Kim: I don't want to advertise that, because I know that that's not something-- Kathy: I don't do it every day. It was $50,000. Kim: I think you just looked at me and went, "This poor girl is so dumb that I'm going to help her out." Kathy: No, no, this was a long time ago, and our systems have changed a lot since then. It's because of this horrible experience, where this guy, and we didn't know he was doing this, but he was just telling people, "Don't worry about it. I'll vouch for. You don't need an inspection and you don't need an appraisal, so let's just stop right there." You never. If you're an out-of-state investor, you always get a third-party appraisal and you always get a third-party inspection. Get several. Get it for everything. It's going to be cheaper than buying a problem. Kim: Even on real properties, still, our new builds get an inspection and an appraisal always. Kathy: Absolutely. The wonderful thing about doing it on a new build is if they miss something, they fix it. Especially, if you do it right before the warranty is over, like you've owned it for a year, and then right before the warranty is over, get that inspection, and get them to fix it. Kim: It's so great and they're so good. The builders, they care about their reputation, and they want to fix it, make it right. The tenants want it right, too. It's really great. I cannot, honestly, Kathy, think of-- real estate just has so many benefits. I know that there can be some things that go wrong, but honestly, when you've got hard assets, like I said, it's [00:14:00] something no one can steal from you. Even if it burns down, you've got homeowners insurance. It's something that can be leveraged with 80/20. If you go into stocks, it's 100% your money, and then even that, it's not a hard asset. Kathy: If you think about it, granted we've had a really good 10 years, but that house that I bought from you, in retrospect, it was only about $5,000 to fix, but with you as a new investor, that was terrible. You're like, "No way." That house has doubled in value and it stayed rented, so it's actually been a pretty good deal. Kim: Oh, I'm so glad. Kathy: Isn't that funny? Then your Chicago properties, again, there was some real difficulty there, but you're walking away with more money. Kim: Absolutely. I'm thrilled with my purchases in Chicago in the long run. That's with any home I've decided. In the long run, real estate is always your best deal. That's number three. You've got a tenant that's paying off this 80%, and the bank is taking that risk. You've also got appreciation. This last year has been incredible. Every year can't be like that, but still, think 30 years down the line, even grandkids, it's just going to be amazing. You've also got upfront depreciation, and I didn't realize you can take all of that now. They've got this thing. If you've got a high income year, you can really help reduce taxes with the upfront depreciation. I think some of it can be up to like $25,000 off your taxes in a year, which is nice for home. Then you've got expenses you can write off. You've got great property management. You've got 1031 exchanges you can do. Also, I think besides it being fun, is number 10, and the most important, is you can teach your kids how to do it. It just gives them a lifetime of such security [00:16:00] that they can feel like they can do, too. When they see just me, a mom, doing it, they're like, "I can do that then." Kathy: It's really full circle, isn't it? It was 10 years ago that you met this woman who was so happy, she inherited-- not inherited, but was left with six homes to be able to live on. Here you are, now showing other people how to do it, here on the podcast, teaching other people. It's so awesome to see. You have six kids. What are they doing? Are they all investing now? Kim: Five are married, and the one we're taking to college, BYU, in just a couple of days. He did return from a mission in Korea. All of them do invest, and they've all seen it, and they want to do it. They're excited. They all have other careers, but it's something that they want to do on the side. I think most of them are right now. One is just getting out of the Air Force. He's a orthopedic surgeon. He said, "Mom, I really, literally can't wait until I start making money so I can start buying real estate." Kathy: Oh, with a VA loan, right? Kim: "I thought you were excited to cut bones." He says, "No, I am that, too, but--" Kathy: To cut bones. Oh my goodness. That's funny. Kim: It's nice to be able to just see them excited about that, because it's the American dream really, I think, is being involved in real estate. Kathy: I agree. Now there's two syndications, and I didn't really want to talk about this, but I also totally believe in transparency. In 2014, I syndicated two-- we had been doing a lot of land acquisition and building homes with experienced developers. Then the word got out, and our 40-year veteran real estate attorney said, "Oh, you should really look at this thing. [00:18:00] It's a wine village and the rent will be much higher because it's direct-to-consumer sales. There'll be tasting rooms and you could charge more." Anyway, we ended up syndicating. You invested in that, and then in another ground-up project. In the projects where we have bought land and we're just building houses and it's a simple plan, it's almost never on time and there's always challenges, but it's fairly simple, and banks understand it. With something like a wine village, as cool as it sounded, as excited as we all were, and what an amazing thing to be able to showcase these different wineries that could have visibility from the freeway, lenders just didn't understand it. Then of course, the fires, then COVID, and it just has been extremely difficult. In retrospect, I think for both of us, in this process of growing, I would never do that deal today because it's too different. It's just too different. Kim: I still think it sounds amazing. I look at some of the syndications on CrowdStreet, and things like that, and they look like they're trying to do the same kinds of things and big multi-family things, but we didn't know. What were you going to ask? Kathy: I was just going to say that we've learned both of us. It's been extremely hard for me. I'm still dealing with it. If there's anyone listening who can help us get financing to build this thing, or do something else with it, I think it actually would make an amazing RV park because you could have all the RVs around the already approved events center for weddings, so you could be little RV weddings with little tasting rooms around. There's so many things we could do for so much cheaper, we just need that creative financing person. I'm actually glad I'm talking [00:20:00] about it because who knows maybe that person will find us. It's right off Highway 5. Kim: I know, it's such a perfect location. It is. It's just, everything looks good to me. Kathy: What did you learn from it, Kim? Kim: Well, one thing I've learned is that we don't worry about it. If you make a bad investment, you move on. Of course, I have to complain to you first. Kathy: As you should. Kim: What are we going to do Kathy, and then you always have this yogi type of, just this beautiful way of responding and I'm like, "She's so mature and kind." Anyway, no, but you just move on and it's just like life. Life is life and there's nothing that ever goes just perfectly. Things happen and go wrong. Even when we have a big family reunion, and we all get together, there's little things that happen, and if you stopped and over analyzed everything, you'd be unhappy. You just have to say, "Okay, this wasn't a good investment, but look at all these," and focus on the ones that are so good, and then that catapults you to more good investments, but there's not a single person who's ever done real estate that's done everything perfectly and that I can testify to. If you're going to do this shoulda, coulda, woulda game, then there's not a single investor anywhere that can't say I shouldn't have. They look back and there's things they could have done differently to make more profit or do differently. You just can't worry about it. Kathy: I love that. Rich tells me that all the time, he reminds me because it's easy to go down that road. I just think, "Oh my gosh, if I just stuck with what I know, which is single family, and we did a fund back in 2009, I would have my private jet," which I don't really even want, so it doesn't matter. [laughter] Kim: Well, it's [00:22:00] all part of the game. When something doesn't go-- really, I'm glad I played Monopoly as a child because, there's no Monopoly game that goes perfectly either. It's just one of those little bumps and hopefully you make enough in the other investments that it makes it okay. I'm just so grateful that I bought the properties last year that I did in Florida. I wouldn't change anything really. It's just been a real blessing, all of it. Kathy: Oh, I love that. I do have one more question that I just got to ask, because I think it's so important. With your husband being a dentist and a high income earner, although I know there's also a ton of expenses there and that's a difficult business, my dad was a dentist, but you have been able to really offset his income with tax deductions by becoming this real estate professional. Tell me a little bit more about that. Kim: Well, I met Ryan Shellhouse through your podcast and he's phenomenal. I think that guy is just a walking brain, but he said, "Kim, you should become a real estate professional." I said, "What's that?" He said, "At least 17 hours a week, if you can dedicate to real estate, then you've got all these benefits. You get the upfront depreciation, you can write off all your travel." There's just so many tax benefits to it. I said, I want to be a real estate professional and so that was cool. He gave me that, but I thought at the beginning that I would be trying to fudge to get 17 hours, but I really do spend at least 17 hours a week now in real estate. It's passive. When you're doing active 1031 exchanges and taking care of your properties, there's just things you need to do. Part of it is looking for other properties and things like that, and listening to podcasts, and all those things count towards the hours. Reading real estate books. I have learned so much [00:24:00] about real estate, I just love it. Your book's amazing, Kathy. I do spend at least 17 hours a week doing real estate, but it's fun. I love it. It even includes the travel part. I go to see my grandkids and I'm writing that trip off, and none of them live by me anymore. I would die without being a real estate professional, I think now, because now, I can just go and it's all written off. Kathy: There's a lot of detail on that. We have webinars on our website at realwealthnetwork.com that will explain that further, and give you resources and referrals to these accountants and these teams nationwide. Kim: You have to log your hours. It's really important. It's not something you're just called and then that's it. Kathy: Yes, you got to do it right. You don't need a license, so you don't have to run out and get your real estate license. It's the amount of time that you spend on your properties, or learning about your properties, or researching, or traveling to them or any of that. You need to have enough, and certainly you do, to have it count, to make it believable that you work that much and you do, and you can't have any other job that you work more at. For many people who maybe don't have that job, but can feel like you have a job because the write-offs can be so enormous, that the amount of tax deduction you get is the same as what a salary would be. Kim: It's such a perfect husband-wife situation. If your husband wants you to be doing real estate and he's got the big 8-to-5 job, you can definitely be a real estate professional with your 17 hours a week. It's just a perfect combination for that type of thing. Yes, I've loved it. I've loved it. I'm so glad. I love to fly to Florida and I can write it off, too. Kathy: You're going to need a hotel to stay in to look at your properties and maybe then your kids also join you in that hotel. Kim: Exactly. Yes, they might be potentially looking as well. Kathy: Yes, that's true. Kim: It really is [00:26:00] a great family business. I've loved it so much. Thank you, Kathy. Kathy: That's really great. Kim: I wouldn't have known about it. See, if it wasn't for Ryan, I met Ryan's through the podcast. Every time I listen to a podcast of yours, I learn so much, Kathy. It's just amazing. Loved it. Kathy: Oh my gosh. Thank you so much. Any final words? What are you focusing on now and maybe it's just enjoying your family and your free time. Kim: I'm actually going to try to slow down a little and just get everything paid off. That is the goal. You start people out with say, 10 properties, because the Freddie Fannie gives you 10 per person. Bruce and I can each get 10, and we've fulfilled that now. I just want to pay those off and have something that our family can have in our portfolio. My kids aren't really going to need it. That's the nice thing. They're very independent, and smart, and able to invest on their own, but there's things that I want to, special causes that I want to donate to. I think that's what really makes it exciting. I don't think there's any real joy after a while in just accumulation. It's a very empty feeling, unless you have something that you specifically want to do for the good of others with that money. That's what brings you real joy. There really is not-- if that's all it is, is accumulation, then it's nothing more than a Monopoly game. I think when you set real intentions, God helps you. I don't ever say the universe, because I want to give credit to me, where credit is due. I think God helps you with those goals and He knows when your intention is good and He wants His children to be successful so that [00:28:00] they can contribute. There's a lot of people in a lot of organizations who need help financially, and that's what really makes life exciting, I think, to be able to help most days. Kathy: I can't wait to have you back on to hear about all the good you're doing in the world. Kim: Well, I just want to thank you Kathy, because honestly, it was Real Wealth, it was having that. Honestly, the organization just gives you courage. I had no idea what I was doing. I didn't know. You teach in your course, and you tutor, and you provide what's necessary, and there just couldn't be a better organization, and it's never too late, and you're never too old. Just remember, five years from now, it's going to be five years ago. Just start, it's always a good time to invest in real estate. Always. People used to tell me that and now I really know that. Kathy: I love that. All you have to do is pull out, just Google FRED, because that's the Federal Reserve and existing home prices, and go back 40 years, and you'll see this trajectory. All you have to do is ask yourself, do you think that's still going to continue based on the massive amount of money printing, the de-valuing of the dollar that increases hard assets? Yes. It's hard for you and me to sit here and say, is your $200,000 house in Florida going to be worth $400,000 in 10 years? Yes, maybe five years. I do hope more people can really get that message and protect themselves from inflation. Kim: Well, that's the great thing about inflation. I hate that the government's always messing with the dollar and now we are going to see, especially with all these taxes and everything, and just so much going on in the world, there will be definitely inflation, but you've got a 30-year fixed loan. Your [00:30:00] payment is not going to change. Even though everything else is going up you've got that permanent low payment, low interest rate, and still interest rates are historically low. I think they're going to stay low for a while, because just one tiny change with all the debt that we've gotten America, is going to be huge for our country. I think they're going to try to keep it low for awhile, so it's just not too late. I think now's a great time to still invest. Even though the 1% is harder to find now, you can still find places in Florida that are cash flowing. If you put 25% down, there's still places that are $500 or $600 cashflow. Kathy: I think you mentioned too, that you had done your underwriting, not really calculating for rents to go up, and I think that's a smart thing to do, but they have gone up and now you're way beyond the 1% rule. Kim: I never did that. I mapped it all out and I kept it at $1,200 in Texas and now they're $1,800 from five, six years ago, and that's just average. They've just gone up so much. It's crazy and it will continue to do that too, so that what else people can take into consideration when they're planning their portfolio. Kathy: Kim, it's been such a pleasure to have you here and you're just my favorite interview so far, so fun. It's so fun talking to you. I think people are going to really get a lot out of this. Kim: Love you and Rich so much. Thank you, and anybody thinking about it, just your first step is to sign up for Real Wealth Network. Start listening to the podcast and just do it. Just jump in. It's so doable. If I can do it, anyone can. Kathy: I love it. I love it. Take care and squeeze those little what, six one-year-olds that you've got. Kim: Can you believe it? All my daughters have babies in one year. [00:32:00] It's so great. Kathy: I'm so proud of my one grandbaby and I look at your picture, I'm like, "I wouldn't even remember each of their names." (laughter) All right. Take care. We'll talk to you soon. Kim: All right. Thanks, Kathy. Kathy: Thank you for joining me here on The Real Wealth Show. You can go to realwealthshow.com to get access to those in-depth webinars on how to really save taxes by owning real estate, becoming a real estate professional, which markets to buy in for more cashflow or potentially growth, which teams have the highest ratings from our over 56,000 members, property managers, and property teams who can find you really good properties which is hard to find in some of the fastest growing markets. You can get all that information at realwealthshow.com Rich Fettke: Views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities, or to make or consider any investment or course of action. For more information go to realwealthshow.com.

How do you find a trustworthy financial planner? And, if you're into real estate, how do you find one who understands real estate and can add value to your specific strategy? In this episode, our guest Kyle Mast, is just that. He's a certified financial planner and a real estate investor who understands that kind of investing strategy. Kyle is the owner of Clarity Financial which is a fee-only, fiduciary firm with a focus on helping pre-retirees, real estate investors, and people pursuing early financial independence, but he's not taking new clients at this time. He loves helping people get their financial lives in order, however, and does that by doing interviews, like this one. Join RealWealth today at realwealthshow.com to find out how to build wealth with new and renovated single-family rentals. Membership is free, and will give you access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you! TRANSCRIPT [music] Speaker: [00:00:00] You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors resource. [music] Kathy Fettke: How do you find a trustworthy financial planner? If you're really into real estate, how do you find a financial planner who understands your strategy and supports it and can help you with it? I'm Kathy Fettke and welcome to the Real Wealth Show. Our guest today is just that. Kyle Mast is a financial planner, and he's also a real estate investor. He's a CFP and the owner of Clarity Financial, but I just want to warn you, he is not taking new clients at this time, but he's happy to give us guidance here on the Real Wealth Show for free. Kyle, welcome to the Real Wealth Show. Kyle Mast: Thanks for having me, Kathy. Kathy: Do you agree that it's important for your financial planner to understand real estate if you are also investing in real estate? Kyle: Well, that's a very loaded question. Yes, very easy question. If you're not interested in real estate at all, then you probably don't need a planner that knows very much about it, but if that's a big piece of your portfolio, especially if it's the majority of your portfolio, you need to make sure your financial planner, depending on what you mean by financial planner, does understand real estate just as much as maybe stocks and bonds or something that's maybe more typically thought of in that area. Kathy: I am so glad you mentioned that because I thought a financial planner technically should be someone who looks at your entire financial plan that would include real estate, but generally, it doesn't at all. It's just mainly for stocks. Kyle: It depends on who. When you go to look for a financial advisor or a financial planner, there's a couple of things that you maybe want to look for when you're looking to work with someone. Some people are very focused on investment management, getting a portfolio of investments that include stocks and bonds, maybe some alternatives in there that could include real estate. Sadly, our industry, a lot of the training is really focused on stocks [00:02:00] and a portfolio and how to allocate it according to someone's age. Those things are all important, but it misses a broader picture of, if you own a primary residence, should you consider refinancing at some point? A lot of times the incentives, maybe, aren't aligned when you work with a financial advisor. If you want to pay off your house, that's less money for a financial advisor to manage and make fees on. That doesn't mean that a good financial advisor or planner can't overlook that conflict of interest and give you good advice one way or the other, depending on your situation. Those are things you have to be aware of. If they're getting paid on a certain product or investment, that's a conflict of interest that dictates how they may offer you advice. Kathy: Sure. Always follow the money, right? That's the problem is we don't know often how to follow the money. I was a mortgage broker for so long. Back when I started, you didn't really even have to disclose how much you were making. It was just backend commissions that would be made, sometimes 3% of a $1-million loan in California, $30,000 to push some paper, but the client really never even knew that we were making that much. Is it the same with financial planning? Is there secret fees behind the scenes? Kyle: Yes, there's different. Maybe I'll try to use an illustration to give people an idea. When you're looking for a financial planner, I'm what's called a fee-only fiduciary. I'm a certified financial planner, but I'm also fee-only. That means I don't earn commission for selling an investment product, I earn fees from the clients, either if that's for managing something for them, whether it's a portfolio of investments or a lot of the times, it's an hourly fee for just advice or an annual retainer fee is actually what I do with a lot of my clients. That type of model is maybe likened to if you were going to shop for a car and you went to Kathy's Fiduciary Car Advising, and you don't work for Toyota, you don't work for Honda, Ford, any of these [00:04:00] companies. Someone comes to you and pays you $300 and says, "I have a family of four, what's the best minivan I should buy?" That, you have no dog in the hunt. You're making your fee for giving the advice, and you could send them to the Toyota Sienna. I'm talking about minivans. We just had twins, so these minivans are on my mind, but you'll send them wherever is best for that person. That's a fee-only advisor or a fee-only financial planner. If you think about, say, a Toyota dealership if you go into there and you say, "What's the best car that I should buy for my family?" they're not going to send you to the Honda Odyssey. It makes sense. They work there, they know their cars really well. There's nothing wrong with that. It's just something that you need to keep in mind. In the financial world, there are advisors that may work for a larger company, I won't mention company names, but larger companies that have proprietary products or investments that a financial advisor may earn a little bit more or a commission or be incentivized in some other way, like with trips or things like that, to sell a product into a portfolio, and there's nothing wrong with that. I know a lot of really good advisors and good planners that are in that model of the industry, but that's a conflict of interest that you just need to be aware of when you're going to work with someone. If you're looking for someone and you want complete objectivity and you want as little conflict of interest as possible, you want to look for someone that's fee-only and that is going to charge you an hourly rate or even an annual retainer. A lot of times people don't want to pay for that. An hourly rate might be-- For a really good one, it's going to probably be closer to the $400 an hour range. That's probably the highest end. You might even get higher than that for one that does a retainer on someone who has a larger portfolio of real estate or investments. Depending on what you have going on, you could pay $10,000 a year and even more. Then there's others if your situation is not as complicated, it might be worth just paying an hour of time of a financial planner. If you pay [00:06:00] $400 and they give you advice on some tax planning situation and a portfolio allocation that saves you $20,000 every year for the next 30 years, it's not a bad investment. [crosstalk] That's the model. If people are looking for something completely objective and if you currently have a financial advisor, that's something to maybe do a little bit of research and see what their model is. A lot of people don't know how they pay their financial advisor. That's the first question to ask, how they get paid, and they should be able to answer it, no problem. They should get paid, and they should get paid well if they do a good job, but you as a customer or client deserve to know how that's happening. Kathy: Which are the highest-paid commission investments, in other words, the ones that a financial planner might benefit the most from putting you into? Kyle: That's a very good question. It changes over the years. Thankfully, there's more regulation than there used to be on some of this stuff, so that does [unintelligible 00:06:57] like you were talking about the mortgage industry, things have to be disclosed more. Some of the higher-commission products these days would be things like variable annuities, which is like an insurance investment product hybrid to really simplify it. That doesn't mean it's a bad product. It means that there's a certain incentive there, and there are situations where that makes sense to have a product like that. Life insurance, some insurance sales, that's part of the industry that there really isn't a non-commissioned product out there. It's pretty much anytime you buy life insurance, there's going to be some sort of commission. Some financial advisors and I have to be careful, I hesitate to call them advisors sometimes if you're just, I would say, an insurance advisor, if someone is just an insurance salesman, they know a lot about insurance. [crosstalk] They know a lot about insurance. I refer clients to an insurance advisor or salesman to advise them on what insurance they should get and then bring it back to me so that I can look over it and make sure there was no incentive. [00:08:00] Whole life insurance has a very high commission. It's a very high-commission product. There's a place for that. For most people, it does not fit. For higher-net-worth people, it can fit in certain areas. Kathy: How high-net-worth, I'm curious? Kyle: Oh, it depends. Kathy: It depends, yes. Kyle: I would say $5 million and above of net worth, you could probably make a pretty good case for it. Below that, you can make cases for it. I shouldn't even put a number out there, but that popped into my mind, but you could go-- Kathy: I'm just curious because we got calls all the time from people wanting us to promote it, and I didn't understand it enough, so I didn't want to do it. I just knew that there were huge commissions, and I didn't really understand the benefit, but I keep hearing how great it is, but I'm not sure if that's coming from the salespeople or from the client. Kyle: Well, to go in a little more detail, in the real estate arena, your listeners, there's a little bit more benefit to a whole life insurance product if it's structured correctly. The reason for that is, if it's someone with higher net worth or higher income and higher income bracket, it allows you to access funds tax-free by taking loans on an insurance product. It's too much detail to go into on this podcast, but there is more of a case to be made there, but you do have to understand it. It is not easy to understand. A lot of times, that that starts to get even higher-net-worth. You get to where you're really structuring a whole strategy around your-- There's an infinite banking concept out there that several people are proponents of. It's a very good thing for someone who has a very high net worth and they're building a team, they have a financial planner, a CPA, an insurance expert, an attorney. It's this family office type setup where you're really building out something that is a generational thing, and your taxes [00:10:00] are just eating you alive, then you add this product in. For the average higher-net worth person from the $1 to $5-million range, I would say it's the minority that you'd need a product like that because you can get the insurance. If you're looking for life insurance, term insurance, which means you pay for it every year for a certain number of years, either it's 20 or 30 years, you get a $1-million policy. For me, a $1-million policy, a guy in the 30s, it's $60 a month, and after 30 years it's done. I don't get any money back, but if I die, my family gets $1 million. You can invest that, put in real estate, whatever, just to take care of your family. It's not an investment product, it's not meant to be a cash management product. For the most part, that's going to be the best bang for the buck. Those extra dollars that you would have paid for a whole life product or strategy can be used to pay down debt or to pay the mortgage on a rental property, invest in some other way. Dave Ramsey often pushes the "Buy term, invest the difference." That, as opposed to whole life, is not quite that simple, but for most people, that's probably a good fit. Kathy: No, I just figured that it was circulating among regular folks and that probably the people benefiting the most were selling, but everybody's got to make a living, right? Kyle: Oh, yes, definitely. Kathy: I find it fascinating to meet someone like you because I was just talking to Rich thinking this is what we need, we need that person who can look at everything we're doing and let us know if we've got the right insurance, or maybe we're not diversified enough. We're definitely not diversified enough. We're barely in the stock market, we played a little bit when it tanked last year but not my expertise. We just didn't want to put too much into it, I have a little bit in gold. I don't know if that's a good thing, but to have a service like that, where somebody is just being paid by the hour, it [00:12:00] sounds amazing. I know that I want to preface this with letting our audience know that you are retired. You are not taking-- I think you're retired or you're not taking new clients. Let's just get that clear. You're not promoting yourself. How does someone find someone like you who is taking clients? Kyle: That's a good question. I'm not officially retired. I guess I could if I want. I enjoy my job a lot. I've really dialed it back. Like I said, we have twins that are here now, so family's really important to me. Financial independence is a big thing for me, too. To find somebody that is that hourly model, there's a couple of organizations out there. I'll throw those out there. That's actually probably a good place for listeners to head to. One is the XY Planning Network, it's called. Because I'm a member of the organization, it's a professional organization that we do continuing education through. It's only fee-only certified financial planners. There's no commission product or financial plan as a part of that organization, and they have a website. You can search for someone by geography, you can search by for someone by expertise. If you want someone who's real-estate-focused, it's a very good place to go for that. The other organization is NAPFA, N-A-P-F-A, the National Association of Personal Financial Advisors. That's also a fee-only certified financial planner, CFP-only organization. It's a similar place to go to find someone that works on that model. What you will find is you will find people like in any industry, people that have less experience, they might still be really good at their job. There's people who have less experience than me that are way smarter than me and do a way better job than I do, for sure. What you'll find is that people that have 5 to 10 years of experience, it's going to be more like me. At least in this industry, there's such a demand for the fee-only financial planner [00:14:00] that has the 10 years of experience already that a lot of us are very busy or we've really dialed it back to not be taking on clients or take on people that we just really like. It's less about growing the business anymore, as opposed to working with people that we can really provide value to. Those would be the good places to start. If you go to either one of those websites, they'll have a description of what that person looks like. I should say, your certified financial planner, not every financial advisor out there has that credential. There's CPAs, you have these other professional designations out there, and that certified financial planner-- Let's see. When I took it, it was seven separate exams that you have to pass and then a 10-hour, two-day exam that you have to pass. You have to have three years of experience to hold the credential that you have to do under another CFP. Those requirements might've changed just slightly, currently, but that's what you're looking at. Their work is in insurance, estate planning, investments. There's several other different courses that you have to go through, but that's the person that you're wanting to look for. You want someone that's looking at everything. Then, honestly, if you're talking to somebody like you started off right at the beginning, to find someone that if you're very real-estate-focused, you don't want someone that says, "Sell all your real estate and put it into Tesla." Kathy: [laughs] That's right, yes. Kyle: That just doesn't make sense. You also want a CFP. If you think of a CFP as the quarterback of a football team, there's a wide receiver that knows his job and is way better at it than the quarterback, but the quarterback knows about what he's supposed to be doing. He's doing something out of line. If I refer to an attorney for estate planning and I see something that's not quite right, I'm not an attorney and I can't give specific legal advice, but I can at least tell the client, "You need to get another opinion. "This is incorrect." That's how a financial planner works. It's that broad [00:16:00] stroke over the entire situation. If you're more real-estate-focused, where I was going with that is the tax implications. A lot of financial advisors don't even look at if you're starting to draw income in retirement, you need to look where you're going to draw it from. Do you draw from a capital gains with a lower tax bracket? Do you draw rental income? Do you pull? Do you get a home equity line of credit to do income for one year because your taxes are too high and then you pay it off next year? There's all these little pieces, and when do you take social security? They all balance each other out, whereas if you have someone who's just investments or someone that's just insurance, they can give really good advice in those areas, but they've got to meet together. If you're getting a 10% return in one investment but your taxes are hitting you at 45% because you took it out of the wrong account or in the wrong strategy, you're really negating a lot of the value that's provided there. Does that answer the question? Kathy: Yes, yes, it does. I'm wondering when we're going to get an AI that we can just put everything in and it spits out what we need to do, [laughs] then the government would get involved and not give you this test. [laughter] Kyle: That's right. Yes. The problem is people don't fit into a box good enough for AI. If we were all robots, then I think they could create an AI for it. [crosstalk] I have a client that he's losing his job, but they saved really well for retirement, and he's going to be retiring next month, but his situation is way different. He's able to do that because his living expenses were really low. I have another client that's a very similar situation and that it's going to be tough for them because their strategy could be the same if their lifestyle was different. You really have to have someone that really wants to look at your whole situation and make recommendations specific to you and your family, the goals that you have. Do you have kids, do you do not have kids? Are you going to get- Kathy: Do you have goals? Kyle: -inheritance at some point? Do you have goals? Kathy: Right. We've got to start there. Kyle: Yes. I shouldn't assume that. Yes. Kathy: A lot of people haven't sat down or you have to keep revisiting them [00:18:00] because life changes. That's something that you would want to do, ideally, with a coach or an advisor. I'm curious why a financial planner would choose one over the other. It seems like you would make more money, and maybe it's the same thing, but in a situation where it's assets under management or commissions or both versus just a flat fee. Kyle: I'll be very transparent in how I operate my business. I do a lot of assets under management, and I also do one-time fee-only hourly stuff and then retainer, where you charge a certain amount a year and the client has access to you. Initially, to get into the industry, it's a lot easier to do commissioned products. You can sell a product. It's like you said, everyone needs to make a living. I want to make sure that we're not-- Sometimes I tend to talk down on that type of the industry, and I really need to be careful not to because these are good people that are trying to make a living and really believe in the product that they're selling, they're just not looking at the whole picture sometimes. Usually, early on in a career, that type of commission product makes more sense because if you're doing assets under management, if you're selling a $100,000 product and you make a 5% commission on it, you make $5,000 just like that. If you're going to manage assets for clients, you're advising them on real estate and investments and it's $100,000 worth but you're going to charge 1%, which is maybe an industry standard, that's $1,000 a year for five years that you have to wait to get that $5,000 if you would've just sold them a product. That's the temptation, it's a delayed gratification type of business. The first two years that I started my firm, I bought a few little clients from an old firm and started my firm. I made $13,000 the first year, $19,000, the next year, super-small, but I was building the [00:20:00] model of retainer clients only, long-term. That's why an advisor might choose one or the other. Apart from the objectivity, I chose this model because I want to make sure that my conflicts of interest are as clean as possible for clients and that they know that when they're coming to me, too. Kathy: [crosstalk] Yes, I'm sure. It makes sense. It's the same for me at RealWealth. I could be selling $5-million homes in Malibu, but that's just not where my heart's at. I want to help the average person build a portfolio of $100,000 homes that pay us barely anything. Kyle: Yes. Thank you for doing that. Thank you for not [unintelligible 00:20:37] and doing the real wealth instead. I appreciate that. For everyone listening, I have a couple of homes that I'm going through in Florida through RealWealth. I was telling Kathy before we got on that I wish I would have found them earlier because I tried to do my own vetting ahead of time in the market and that it's working out, but it was a lot of work, and it has been nice to work with a team. Kathy: That means so much. I was so surprised when you said that in our pre-interview, I had no idea. I should've known, but thank you for saying that. Tell me, if you don't mind, what was difficult about trying to do it yourself because you live in Oregon, and you were trying to buy in Ohio. What did you learn in that process of doing it yourself? Kyle: It's just hard to know where to start. I just booked a ticket to Dayton, Ohio, and met with five agents and three property managers, and a couple of local lenders in the area. You come away thinking it's just a whirlwind because you haven't actually worked with these people. You've interviewed them. Do they interview really well? They don't do a really good job. I've gone through one property management company there, I'm on the second one, and they're doing okay, it's not amazing. It was very tough. I tried to diversify out of Oregon, so that was the reason that I went there, and I'm looking at Florida and some other markets, too. [00:22:00] I'd rather spend my time analyzing deals or getting the financial stuff that I'm really good at, rather than the boots on the ground, vetting property managers and builders, which I love that you guys do that. It's really nice. Kathy: You don't have to do that. I Love what you said in, again, the pre-interview, just like, "What an interesting model to have crowd-based real estate?" Was that what you said? Kyle: Yes. Kathy: That, I had never really thought about it that way, but that's what it is because these teams that we refer people to, if we get poor reviews from our members, well, they're not going to be on our list anymore. It forces them to be great and to take care of our members. I really appreciate that perspective. They work so hard at doing that. I sometimes very rarely because I need to be in a really good mood and feel really strong, but sometimes I'll do a Google search on myself. Recently, I saw something on Reddit that was about us, and someone was like, "Oh, I met them, I'm not impressed." I'm like, "Oh my gosh, I wonder why, what did I do?" They also said, "What do you need them for, anyway? Just go do it yourself." I still wanted to respond and say, "Yes, do it yourself and also know that there's this group of people who have a great track record, that's the benefit." Anyway, it's hard to understand that until you've done it. There's a lot of do-it-yourselfers. Do-it-yourselfers are just that. They're good at that. There's people like you and me that would rather not, rather have to pay someone else to do it. Just like I'd rather pay you to look at my portfolio and help me, it's the same kind of idea. Kyle: Yes, that's a really good point. That's not just in real estate, that's a decision we always have to make, whether we do something ourself or whether it makes sense for us to hire it out, pay someone else to do it. [00:24:00] If it's the lifestyle that you want, that you love going into a home and Chip and Joanna Gaines'ing it to death, really renovating the place, burst strategy, bringing in tenants, if that's what you enjoy doing, don't use ReealWealth. Why would you do that? Because that's what you enjoy. I enjoy financial planning, I enjoy time with my family, I enjoy investing a lot, but that's at a high level. I don't enjoy getting down into the weeds, at least not anymore. When I first started, I was helping to renovate our duplexes and things like that. You move past that, and I didn't enjoy it. That was to learn what I needed to know. Some people enjoy it. That's in anything. If you're going to fix your own car if you really like fixing your own car, go for it. I don't like that, so I would have somebody else do it. I'm putting solar panels at our house. I'm really enjoying it. Kathy: By yourself? Wow. Kyle: I'm not going to hire someone else to do it. I'm doing it myself, yes. Kathy: Oh my gosh. Kyle: It's one of the best, I'm having a blast doing it, which I wouldn't have told you that I'd be up for doing something like that, but that's what people have to decide. That reviewer on Reddit, that's great for them. Don't hire them if you can save money or you think you can do a better job, but if you have hundreds or thousands of investors that are vetting these providers, it might be hard to do a better job than that. Kathy: Yes, agreed. Oh, so, so good. I know we're just about out of time. I'm just going to look at my list of questions to see what I might have missed. Let's talk about this. This is a question that comes up a lot. Is there an age limit to investing in real estate because I know that that's been a thing for financial planners saying, "Oh, by the time you're 60, you really need to be in conservative investments," maybe even younger? I'm not sure. We have a lot of people that come to us later in life because they are maybe liquidating a property that they had in California that can sell for a million dollars and they can get into five brand new rentals [00:26:00] in Florida or something like that. Maybe they're 65. We've had people in their 70s and 80s even doing that and increasing their cash flow. What are your thoughts on that? Kyle: I would say, definitely, no age limit. Real estate, just like a lot of other investments, you can dial up the risk or dial down the risk just as pretty easily within that asset class. It's real estate and this depends on how you look at risk, too. Maybe you put 75% down on a property and you only take a 25% loan because you just want to have this little tiny mortgage payment that is not a big deal. You're 70 and if something happens where there's a tenant out for a few months and you have some cash reserves that you can pay that, it's not a big deal, or you can just pay it with your social security check to cover that mortgage, or you pay all cash for the property, to reduce the risk. Now, I will say you have to be careful when thinking about risk. What I've seen, especially in this market, is if you pay all cash for a property, I would say there's actually some more risk there than you might realize. I think you've talked about this on this show with other guests before, too, but the fact that you can get a 30-year mortgage for 2.9% right now or as an investor, 3.5%, maybe on a single-family home, and you can take that $150,000 that you would have put to pay cash for it and keep that in reserves or maybe get another one like you said, if you sell a property in California and you get a few nice loans on a few other properties, that cash flow, you're paying down the mortgage, getting depreciation, I would argue that having all of your cash locked up in that property, there is a different kind of risk to that that you do need to be careful of. You might not want to do that with all your properties. Even if you're 70, even if you're 80, it's okay to have a mortgage. If you have a big chunk in the bank of reserves that you can pay that mortgage off for 20 more years and you're 80, I think you're going to be okay. [00:28:00] [unintelligible 00:28:00] Yes, it is. Kathy: It's all about reserves, right? It's good property management and reserves. Even in our own single-family rental fund that we have, I was really nervous about getting leverage on that because you got to make those payments. When you're talking about a $5-million loan, it's different than a $100,000 one. You got to be able to make those payments. We just did what you said. We kept plenty in reserves, but we also had some of the portfolio in cash so that if anything happened, we could just sell that one property and we got the cash or invest it in short-term lending or something like that. I do agree that regardless of age, you could be 30 and it's a huge risk for you if you don't have the reserves but you bought a property and it's vacant for a couple of months and then there's repairs that are needed, which there always are, don't think that there won't be, and you don't have that money. It doesn't matter how old you are. It's a horrible situation. Kyle: Yes. Definitely, the reserves will make or break a real estate portfolio. That's a big deal. We're at a weird time now where inflation is outpacing these loans that you can get on properties. That's not always a typical scenario where you can get a loan with a lower interest rate than what the actual inflation numbers are coming out with. If you want to look at what inflation might really be, you're probably doing even better, but if you can get a loan for 3% and inflation's at 5% right now, the bank is paying you to have that loan. It becomes an asset to you in the long run. Kathy: I'm glad you, again, brought that up because so many financial planners and just conservative investors believe you should pay off your primary residence when, in fact, that's where you can get your cheapest money. If you refi your primary and get that 2% loan or whatever and re-invest that, of course, you need to know how to reinvest that properly, that could be a really good use of money. Do you see any issues with cash-out refinancing your primary? Kyle: It really depends [00:30:00] on someone's situation. I don't. Personally or for a client that's very responsible with money, has good savings, has good reserves, there, I don't think there's anything wrong with that. It is the cheapest money that you can get, it's incredibly cheap. We're the only country in the world that has these 30-year loans that you can get at these low interest rates. It might not always be the case. The other thing that I should say is that it's not always that way. You look at different decades, it doesn't always make sense. What I'm advising clients to do now, 10 years from now, it might change, depending on if interest rates are a lot higher, if they need to refinance for some other reason, or say they are buying a house and interest rates start at 8%. Now, it might make sense to pay that loan down faster because you're getting a guaranteed 8% return on paying that debt off and say inflation is about the same. It's not a blanket statement for all times, but where would we sit now, with these just historically low-rate loans that are available with inflation outpacing it, is very unique. If you have the reserves, it's actually a very good hedge against inflation, which reduces your risk because if you have too much cash not working enough for you, inflation's going to eat away at the value of it. If you could put a loan on a property that cash flows very well, this is not speculation, these are investments that cashflow, then it helps hedge against inflation, which is a very big risk to retirees especially if you have fixed income, [crosstalk] yes, you can really be hurt if the cost of food doubles in the next five years and your retirement income does not. Kathy: The cost of everything doubles or triples, it's accelerating. Finally, is there a point where one might be not diversified enough and just own too much real estate? Kyle: Yes. Real estate, it depends on the person, whether you can say you have too much real estate or not enough real estate. I would say if someone's very heavy-real-estate-focused, you understand the industry, that's what you want to be invested in, I would say it's more about making sure you're diversified within markets because if you are too heavy in one market, that can really hurt you. I would also say that there's benefit to the liquidity of other types of investments. If you're investing in a 401(k) or Roth IRA, a traditional IRA, even precious metals like gold and silver, there's different benefits to those. It is good to have some of those other vehicles, especially like Roth accounts that you pay the tax now and you never pay tax again. I think that's an account that's going to go away, eventually. If you can take advantage of those accounts, max those out, I would definitely recommend doing that. If you're really getting into real estate investing and buying more properties, it's not too much trouble to max out your Roth IRAs, too. I've seen where clients that future investment liquidity from those accounts affords them the ability to buy a property and pull it out tax-free, whereas if you pull it out of a 401(k) or a pre-tax account or sell an investment, you might have to pay tax on it without 1031 exchange, but a Roth IRA account if you've got $100,000 thousand in there, you can pull it out, and it doesn't mess with your taxes at all. Kathy: Fascinating. I'm sure if we could take live questions, we would get a lot of them, but we've already taken so much of your time. Thank you, Kyle, so much for being here on the Real Wealth Show. It's been really enlightening. Kyle: It's an honor, Kathy. Thanks for having me, I appreciate it. Kathy: Thank you for joining me here on the Real Wealth Show. You can go to realwealthshow.com to get access to webinars. There's over 500 that go much, much deeper into the mechanics of real estate investing, including interviews with CPAs, who can really help you structure things and save you a ton of money. We have property managers, who will teach you what to look for in property management. They teach those courses and those webinars. We have mortgage brokers, who will show you what to really look for and alone, especially when it comes to investment property. Then we have teams across the country that are over 57,000 members that RealWealth have been working with and can give us great feedback on how they're doing, and they're on our list because they're doing great, and they can help you acquire investment property with property management in place in really hot growing markets like Florida and Texas and North Carolina, and then, of course, great cashflow markets like Ohio. Again, you can go to realwealthshow.com. It's free to join, and you'll get access to all of those in-depth webinars. Thanks so much for joining me here on the Real Wealth Show, and we'll see you next time. Bye-bye. Speaker: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:35:11] [END OF AUDIO]

Getting your financial world in shape isn’t only about numbers. It’s also about discovering your lifelong goals, the milestones you need to get there, and what you are doing right now to support that journey. Our guest today says that many people stumble around when it comes to their financial future because they haven’t really figured out what they are trying to accomplish, over the long term. As an example, a college education may groom a student to be a good employee, and not someone who might go beyond employee status to start their own business. Jonathan Satovsky is the CEO and Chief Behavioral Coach of Satovsky Asset Management, or SAM. He takes a mindful approach to financial planning by helping clients figure out what they really want and the investment strategies they'll need to accomplish their goals. In this podcast, he shares some of his thoughts on how to get in touch with your financial muse in order to map out a plan for financial freedom and flexibility. If you’d like to become job optional by investing in rental property, join RealWealth for free by visiting RealWealthShow.com. As as a member, you'll have access to the Investor Portal where you can speak with one of our experienced investment counselors, view sample property pro formas, and connect with our network of resources, including property teams, CPAs, attorneys, lenders, 1031 exchange facilitators, and more. Subscribe to the show on Apple Podcasts and get the latest episodes uploaded to your device as soon as they are released. Like what you hear? Throw some stars our way and leave us a review! We appreciate you! Go to www.RealWealthShow.com for the transcript or to listen to past episodes. Transcript: [00:00:00] [music] Announcer: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investor's resource. Kathy Fettke: Getting your financial world in shape isn't only about numbers. It's also about discovering your lifelong goals, the milestones you need to get there, and what you're doing right now to support that journey. I'm Kathy Fettke and welcome to the Real Wealth Show. Our guest today says that many people stumble around when it comes to their financial future because they haven't really figured out what they're trying to accomplish over the long term. As an example, a college education may groom a student to be a good employee but not someone who might go beyond that employee status to start their own business. Jonathan Satovsky is the CEO and Chief Behavioral Coach at Satovsky Asset Management or SAM. He takes a mindful approach to financial planning by helping clients figure out what they really want and the investment strategies they'll need to accomplish their goal. In this podcast, he shares some of his thoughts on how to get in touch with your financial muse in order to map out a plan for financial freedom and flexibility. Jonathan, welcome to the Real Wealth Show. You specialize in some of the topics that we don't mention very much and that is financial intelligence and really emotional intelligence. Let's talk a little bit more about that. What does it mean to have emotional intelligence and specifically financial intelligence? Jonathan Satovsky: I think I stumbled into the field of financial planning and wealth management as a by-product to the fact that they don't teach it formally in high school and college. Most people learn by rumbling, bumbling, and stumbling. At a young age, most people aren't thinking about the lifespan of their financial journey. It takes a tremendous amount of emotional intelligence to not only know what you want, but to start mapping out a game plan of how to execute and make decisions that are going to give you [00:02:00] the financial freedom and flexibility throughout the course of your life. Whether you're investing in real estate or the stock market or whatever it is that your plans are, to give yourself that autonomy and freedom, everyone ultimately is going to reach at some stage of their life intentionally or unintentionally. Kathy: That's interesting. My daughter just graduated from San Diego State and she said, "You know, I feel like I've been really well trained to work for someone else." Even though she had a degree in business, but I think they would still think it should be in business administration or marketing for someone else. Very interesting. We're really not taught to think about the future, where we want to be, and get clear on what's most important, and then what are the financial steps to get there? Jonathan: Well, it's no different than your daughter that's graduating. People are asked at 17 years of age, "What do you want to do the rest of your life? Pick a major, pick a career, pick a path." People can idealize what it is to pick any profession. Law, medicine, being in real estate, being in finance. Kathy: I believe you said you're in Italy right now. Is that right? Jonathan: I am in Milan. Yes. Kathy: Okay. Somehow you found a parking spot. That's wonderful. Thanks for taking the time for us here. Now, you specialize in behavioral coaching and specifically behavioral finance. What does that mean? Jonathan: Trying to help people align their idea of how they want to live and their goals and dreams with what they're actually doing, like a financial doctor, where we try to help people, hold them accountable to what it is they say is most important, and aligning their actions to what it is that are their priorities to keep them on track. Behavioral finances, as my friend says, "You can be Einstein for others but Mr. Magoo for yourself and everyone needs a coach to be able to help keep them in line when people fall off track. Kathy: Okay. Would you say that people even have a track [00:04:00] when it comes to their finances? Like I had said earlier, my daughter just graduated from San Diego State. She said, "Wow mom, now I have a degree where they really taught me to be a very good employee," and to work for somebody else even though she has a business degree. Are we taught happiness and how to create a life of happiness and a career that surrounds that or not so much? Jonathan: Not so much. There's a famous book by Thomas Campbell, Hero of a Thousand Faces, if you've ever heard of it. The concept of every hero's journey is the pursuit of self-discovery and pursuit of joy or bliss. It's easy to say to a 21-year old graduate in college, "Go pursue your bliss." Then they're just like, "Wait a second. I need a job to be able to pay the bills." They're not thinking on a deeper level of understanding to know what brings them joy. It is not something taught, it's something that is learned through experimentation and degree of self-awareness of trying to balance competing priorities in life. Kathy: Sure. I mean, I never-- Jonathan: I think that having someone to pull it out of you, having a financial coach or therapist or just observing life and experiences to feel through what works, what doesn't work, what feels right, what doesn't feel right, ideally, people would start foundationally with some financial literacy in good habits, to be able to give themselves the flexibility to take risks, to experiment with things that are going to light them up and unlock their unique abilities and talents to shine in the world, whatever that means. Kathy: When you're working with a client, what are the powerful questions that you ask them to dive into that part of themselves that, maybe, they haven't paid any attention to? Jonathan: First, where can we help? Then you just probe with open-ended questions. People become [unintelligible 00:05:48], "Well, I'm thinking about doing this, this and this and this. How can you help?" You just take it one step at a time. There isn't a silver bullet. The answer always is, it depends. One question leads to the next [00:06:00] to really dig deeper and I think a lot of it has to do with what they witnessed from their parents' or grandparents' experience, friends, community. There's a book called The Excellent Sheep that was written by a Yale student who became a Yale professor that said a third of the kids go to school with a creative ambition, and by the time they're juniors and seniors, because of peer pressure from their teachers, parents, friends, they end up going into what is the safe route of management consulting or doctor, lawyer and they give up on their passions or creative pursuits because they figure, "I'll make money and then I'll pursue the creative pursuits." We try to find a way to challenge people in a carefrontational way, in a provocative way to say, "What is it deep down that really is going to bring you joy? Let's pursue it. Let's not waste any time in your life." Kathy: Let's say it's music. Let's take that. I'm here in the Los Angeles area and there's lots of people pursuing their joy of music and not really making money from it. We just hired some young 24-year-old musicians for a private party and they were so talented. There's no reason why they weren't mega superstars, but they're not. What do you say for people who really are pursuing what they love but not getting anywhere financially? Jonathan: How do you apply that skillset to option B, C, D? Everything is about optionality. People want to go all in and say, "Okay, I'm going to be the next queen, or [unintelligible 00:07:32] or whatever. I'm going to be a megastar robust." From what I understand, the little background I understand in doing a little digging, I think Will Ferrell was living in his mom's home working at Target for eight years or something like that while he was pursuing his acting career. You got to make some sacrifices and challenge yourself to bring that creative spirit into some practical day job that [00:08:00] can bridge the gap between the dream and some other alternative reality so that you have some in-between that you aren't boom-bust. Some people like to live with boom-bust but they have some in-between that is sustainable and practical. Kathy: How do you know if somebody is financially healthy? Jonathan: Your daughter just graduated from school. Most people are used to the vernacular of getting a report card. People go for an annual checkup with a doctor and they get blood work and they see how their personal health is. We apply the same concept in finance is where if you take a look at someone's balance sheet and someone's cash flow, you can ascertain the equivalent of a report card for someone's financial health and wellness. That's the gauge of someone's financial health and progress that takes time. It's a building block. You start at one place. Rome wasn't built in a day. It takes time but it's a starting point to be able to show the progress. It's not uncommon. It's hard to imagine but it's not uncommon to see tenfold growth of someone's balance sheet in a 10-year period of time if they get into good habits, particularly starting through from the beginning. You can see exponential change in someone's financial health and wellness, if they have that mindset in place. Kathy: What are those basic habits? Jonathan: Well, give you a simple idea of pay yourself first. I met a woman who was 50 years old that had accumulated millions of dollars with a simple concept of paying yourself first. She had a paper route at 15 and she was taught to save a dime of every dollar that she made and by saving a dime of every dollar and investing at a very young age and thinking about a lifetime of investing, she didn't sweat the short-term, she didn't get caught up in the minutia day-to-day, week-to-week, quarter-to-quarter. She was thinking about a lifespan of investing habits. By carving out a dime of every dollar for her future self, you accidentally create [00:10:00] financial independence. Kathy: That's great. If you do more it goes even faster. If you did 20% you just doubled it. Jonathan: I guess there's other vices that people can get addicted to. Drugs, alcohol, sex whatever it is. I think the addiction of seeing your money accumulate is pretty good. It's pretty fun. Kathy: It's a good one. Some women have addictions to buying fancy Italian bags like where you are now, but I would prefer to buy a little rundown house somewhere or it fixed up one. Jonathan: Exactly. Kathy: Very good. Number one, basic step is to save that 10%. Again when we first started, we were doing as much as 30%. It was like 10% for investment, 10% for savings, and 10% for emergencies. If we didn't have an emergency that got to go into the long term, so you do have to have great discipline and just stay within that budget, but still, find great ways to live even within that budget. We did a lot of vacations. They were camping at free campsites and we had a blast. I would beg to say that our kids probably liked those little lakefront camping trips more than well, I don't know about more than that oceanfront Hawaii place, but when they were young they loved it and it was free. Jonathan: Those trade-offs though at a young age and even at different stages of life, it's a sacrifice of prioritizing your values in a way that ultimately has given you the freedom to be at the Hawaii beachfront place that you wouldn't have had if you weren't establishing those habits young and doing it without any guilt. You're able to do it with a lot of pleasure now. Kathy: Yes, especially if that income is being generated from assets that you own and that you're going to spend that money this month but there's going to be more coming next month. Yes it's a completely different mindset [00:12:00] I am going to look at this list to make sure I did not miss anything. First of all, what are you doing in Italy? Are you on vacation or do you live there? Jonathan: In the realm of COVID and Zoom, I have managed to experiment for now what's coming about a month of designing a life that I can-- initially what was intended to be a vacation. I've visited some clients here in Italy and ended up meeting prospective clients, being referred several people still staying on the New York timezone of actually working 3:00 to midnight and vacationing from 6:00 AM to 3:00 AM and then 12:00 PM after. The only thing that's gotten changed in this last month is sleep, but other than that it's been fantastic. Kathy: Sleep when you die. That's what they say. All right. It has been truly a pleasure to have you here. I would consider that living real wealth. That's what we teach here, is find out what brings you bliss and work towards that, and find out how much that will cost. It may not cost as much as you think, and then create the passive income that will support that. What are your investments of choice? Where do you put your money? Jonathan: I know you teach a lot about real estate investing and direct real estate investing. Philosophically the ideas that you share the principles are universal. In order for me to travel, in order for me to unplug and turn off my phone for 24 hours or even a week theoretically, the way that we approach it is by investing in the cheapest most profitable businesses in the world, predominantly on the equity market. In the real estate market, the same principles apply. We can invest in the most profitable real estate in the world. It's not for me to judge in the last year or two for example it happened to be warehouses and cell towers. Other times it might be shopping centers [00:14:00] or multifamily houses. What we do is use technology and computers to be able to curate that portfolio in a tax-efficient way so that people can relax and enjoy their lives without stress and benefit by the labor and efforts by others. Kathy: Indeed. Very good. Okay, Jonathan. Well, I'm sure you've got plenty to do and to sight-see while you're in Europe. I do thank you so much for being here and sharing your wisdom with us here on the Real Wealth Show. Jonathan: Thank you for having me. Kathy: Thank you for joining me here on the Real Wealth Show. Join Real Wealth Network today to find out how to build wealth with new and renovated single-family rentals. Membership is free and we'll give you access to our investor portal where you can view sample property proformas, and then connect with our network of resources nationwide, including experienced investment counselors, property teams, lenders 1031 exchange facilitators, attorneys, CPAs, and more. These professionals come highly recommended by our over 56,000 members. To join, go to realwealthshow.com. Announcer: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:15:26] [END OF AUDIO]

Will home prices continue to rise at this furious pace, or will they plummet back to earth like they did during the housing meltdown? Or maybe something in the middle? In this episode, we’ll hear from an expert on the housing market, the impact of the pandemic on buyer demand, home prices and migration patterns, and what the data shows us about the future. Dr. Frank Nothaft is the chief economist for CoreLogic and leads an economics team that’s responsible for analysis, commentary and forecasting for the global real estate, insurance, and mortgage markets. The Southern California-based company tracks, gathers, and analyzes massive amounts of property, financial, and consumer data and provides reports for the real estate and mortgage industry along with customized business intelligence reports for clients. Join RealWealth today at realwealthshow.com to find out how to build wealth with new and renovated single-family rentals. Membership is free, and will give you access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you! Transcript: [00:00:00] [music] Speaker 1: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors' resource. [music] Kathy: Will home prices continue to rise at this furious pace, or do we have a housing crash in our future or just a slowdown in price growth? Our guest today has got a lot of information on that so I'm excited to share it with you. I'm Kathy Fettke and welcome to the Real Wealth Show. Frank Nothaft holds the position of executive, chief economist for CoreLogic. He leads the office of the chief economist and is responsible for analysis, commentary, and forecasting trends in global real estate insurance and mortgage markets. He's here with us today on the Real Wealth Show. Frank, welcome to the Real Wealth Show. I've been really looking forward to this interview. I can't believe that I almost had to do it out of a salon when we had a rolling blackout, [laughs] but here we are. Thanks for your patience. Frank: Oh, absolutely. Thanks for having me today, Kathy. Kathy: So honored really, truly so honored to have you here. A lot of people are extremely confused about what's going on and even more confused about what they should do. Should they buy? Should they sell? Should they buy investment property, apartments, single-family? Our listeners are mainly investors in one to four-unit buildings nationwide. Are we looking at a continuation of what we've been seeing with home prices going up with no end in sight? What's happening? Frank: Kathy, this summer has been hot. It's not just the temperatures, it's the housing market as well. As you know, when I look around the country, there are a number of markets where, of course, they have triple-digit temperatures, but they got double-digit home price growth and double-digit rent growth. The market is just exceptional right now. Of course, partly that's fueled by the very low [00:02:00] record low level of mortgage rates that's really driving demand. It's also fueled by a shortage of inventory for sale on the marketplace. Between both those forces, one driving up demand one curtailing supply, we've got just a crazy amount of home price growth. Now, it's not just home price growth. As I mentioned, we see some real pickup in rents, rents on single-family homes. I think that's an artifact of this change in need for space as a result of the pandemic because what we've seen is that so many families, they're looking for more space inside their home, and also more space outside their home. The corollary of this pandemic is that it's severed the need of many workers to be co-located or located near where their employer is, they can work remotely. That's enabled many of them to pick up and maybe move a little further out, or move a lot further out, and be able to afford more space, more house, more shelter to either buy or to rent. Kathy: They don't have to try to find something in a major city or just on the outskirts of a major city where everybody else wants to live and it's been difficult to get in and very expensive, they can go anywhere. That's amazing. We've understood this concept at Real Wealth for 10 years, we've been a remote company, and we wanted our employees to be happy and live anywhere they want and be able to own property. We understand the power of that. What I found is that I was more effective, because as a CEO, how many times do people come into your office and want something? If I wanted to communicate even if the person was in the office next door, I'd send an email or a text. I wasn't necessarily going in there. We [00:04:00] discovered that without the interruptions and with more focus, we were far more productive working remotely. Do you think more companies have learned that and will continue to stay remote? Frank: I think some definitely have and that's really the million-dollar question, how many of the workers who had previously been working in an office environment, working with their employer, how many now will be working remotely, either remotely full time, or some type of hybrid model where maybe they're working remotely, whatever, two days, three days, maybe four days a week, or something like that? I'll tell you a really interesting study that the McKinsey Global Institute put out earlier this year. They surveyed a whole bunch of occupations in different industries, actually in different countries too. What they concluded was that here in the US, their estimate was that as many as 20 to 25% of US workers who previously had worked in an office environment, could longer-term work remotely, three to five days a week. Wow, that's going to be a big sea change if that does come into play. Again, that's the big question; how many of those jobs that have moved remotely over the last year, how many will remain remotely? How many might switch to a hybrid model? Of course, how many will be back in the office five days a week? That's the big question. I do think we're going to see that there'll be some jobs that do remain remote permanent and/or follow a hybrid model, allowing workers to work remotely, maybe three days a week, maybe more. Kathy: What I've been telling people and again, it's such an honor to have you on the show, because, my dawg, data is so powerful. [00:06:00] I imagine you were already seeing these trends and these demographic shifts of people in high-priced markets moving to more affordable markets where they could have bigger homes and a better lifestyle, that was already happening. Would you say that the pandemic has sped that up or is it just on track with what's already been going on? Frank: Oh, that's such a great question, Kathy. Absolutely, it's accelerated these trends. We have seen these shifts more gradual prior to the pandemic but the pandemic really changes the rules of the game. I'll give you a really good example. For example, what we saw is that in a lot of the really big cities, which tend to be densely populated, high-cost markets, we've seen some movement out of them over the years for people who are looking to buy just for affordability. That really accelerated during the course of the pandemic, accelerated in places like Manhattan, but also in the Los Angeles Metro area. Downtown Los Angeles, you do have some high rises, you got greater population density, consumers revealed a preference to move out of buildings and properties like that, and move further out. With the ability to work remotely, someone who had been working for an office in downtown LA, they could pick up a move to Riverside, San Bernardino, and maybe further out. There, the cost of shelter is so much lower than it is in downtown LA. That's really provided that opportunity for many families that just pick up and move further out, obtain more space, more shelter, but also shelter that's at a lower cost. Now, they didn't just stop at Riverside and San Bernardino. If you believe you can work remotely [00:08:00] longer-term permanently, maybe pick up and move to Las Vegas, or move to Phoenix or Tucson or maybe up to Boise. Boise has been booming over the last year. We've seen prices up better than 20% in the Boise market over the last year. Kathy: Then you get places like Cincinnati, Ohio, where prices have gone up even more than that. Why? Why Cincinnati? I understand Boise, there's fishing, there's skiing, but what's in Cincinnati? Why are prices going up so much in those types of tertiary markets? Frank: Sometimes it's lifestyle. The prices aren't going quite as robustly in downtown Cincinnati but when you look at the outskirts of the city, in the metropolitan area, that's very much more suburban and you're close to a lot of amenities. Amenities, if you like the cultural events in downtown Cincinnati, but if you like the outdoors, you got a lot of amenities, both in Ohio and Kentucky as well. I think that's been very attractive for many families who are looking for just that more space and the opportunity to also be out near the outdoors. Kathy: And affordability. We've taken investors from California on buses and driven them through Ohio and Georgia and Tennessee and these areas where home prices are so, so low. Being in California, some of the cars I see on the road are [laughs] more expensive than these houses-- not anymore but it was. We saw a lot of California members go on these tours and buy investment property but they also moved because when you live somewhere, you don't have to be there all the time. We have friends who [00:10:00] actually work in San Francisco, big tech guy, but he wanted to live in San Diego. San Diego, believe it or not, was much cheaper than San Francisco. He moved his family to San Diego. He'd fly every morning, a Monday morning spend a few days in San Francisco. He'd get Friday off to work remotely. He begun Monday through Thursday, go back to San Diego to live. I think we might see more of that, of people living where they want, and then just going into where if they need to go in the office going in a couple of days a week. Frank: Absolutely. I agree with that, Kathy. We've really seen a shift here during the course of the pandemic and I think some of that's going to be permanent too. I'm really glad you mentioned affordability. Certainly, Marcus likes Cincinnati. That's one of the big attractions. That's an attraction in Riverside, San Bernardino, and some of the mountain communities and the Rocky Mountains, but also the center part of the United States. That's a big attraction of a lot of those cities, especially some of the older cities. They look a lot more affordable than a lot of the cities along the two coasts. Kathy: Now I'm hearing some people say that the cities are going to have a comeback because we know we obviously saw people leaving and going to the suburbs. There are investors who are still buying in the big cities and really believe that once things open up more people will come back. Do you agree with that? Frank: What's so interesting. It's a lot of the young people, the ones who are just entering the labor market, they're the ones who still want that excitement, that energy of being in the downtown city area, partly for cultural events, partly for socializing and things like that. The big change during the pandemic has been that for young people just coming out of school and starting their careers, they didn't need to go into the city. In fact, in a lot of places, they couldn't go into the city [laughs] because of the pandemic. [00:12:00] Many of them ended up staying at home and living with their parents rather than renting a house or an apartment with roommates or colleagues from college or from work or whatever. That was one of the reasons why we saw some weakness in rent and prices and some of these high costs downtown urban markets during the last year because the young people didn't come that normally they come when they graduate school and they start their jobs, they come into the center city, they want that activity, that social scene and all that. Well, they didn't, or they couldn't because of the pandemic. Now as the pandemic wanes, hopefully, it wanes, [laughs] continues to wane. As that happens, I think we'll see more of the young workers who are coming into the workplace, which that'd be the younger millennials and now the Gen Z as they're coming out of college, I think we'll see them return to the downtown, to the center city, to where the action is. We will see that, maybe not till next year, we'll see more of a resurgence back into the city, but I think that's where-- that'll be the leading edge that'll drive a comeback into the downtown area. Kathy: That makes sense. I do have some concerns about these cities that are starting to see these massive changes in home prices due to people coming in from other areas where suddenly everything looks cheap. For the locals now, everything looks expensive right there. The locals aren't going to be able to afford what's happening in their cities. What are your thoughts on that? Are they going to have to move out to another area that's cheaper? How's that going to work or they're just [00:14:00] going to be renters? Frank: Oh, I tell you that is a real challenge in a number of markets especially in some of these markets where they have a lot of additional outdoor amenities and are maybe attracting a lot of tech workers or other workers who really have that ability to work remotely longer term. When I look at some markets like Denver, like Salt Lake City, Boise, Dallas Austin, Texas, that's exactly what we've seen. We've seen a migration, especially some tech workers into these markets and they come with higher salaries, higher income, they're able to afford to buy a bigger home. They're able to outbid the locals who live in those communities, but don't have a tech jobs or not earning the same income, the same salaries as some of these workers who are moving into the metropolitan area are earning. As a consequence, that's pricing out some of the locals who have grown up in that marketplace and that they're finding it very challenging on the affordability dimension. It means that they may have to move further out or maybe they have to relocate to an area that's got a lower cost of living. Kathy: Well, Californians have been doing that to Oregon and to all the nearby states for a long time. I don't think the locals appreciate it unless they own real estate before [laughs] the Californians came, then they were happy. If they were trying to get into the market, it's been an issue for a long time, is that that big-city money spreads out? I am curious about apartments. You said that single-family home rents have gone up dramatically. What about apartments? Frank: Apartment are beginning to come back. It's so [00:16:00] interesting with consumers revealing their preferences for space and ultimately for structured time. What we saw in 2020, in the early parts of the pandemic, is that many tenants, but also people who were buying homes, they had a distinct preference for single-family detached housing because the more living area inside the home, and you got some green space around the home. If they couldn't afford a single-family detached, the next preference was single-family attached. The townhomes, condos, row houses. Least favorite was high-rise apartment buildings or rental, or for sale condominiums as well. That was the structure type that was least in favor. An in-between single-family attached and the high rise apartment buildings was the low rise garden-style apartments in suburban neighborhoods. That was in favor as well, a bit more favor than high-rise apartment buildings and less favor than single-family detached. When we look across that spectrum of structured type single-family detached, big demand, double-digit home price growth over the last year. In fact, in our latest CoreLogic home price index for single-family detached through the month of May, we recorded 17% appreciation in one year in our national index for single-family detached. Single-family attached, doing pretty well, we measured about 9% appreciation, but you can see that difference between 9% and 17%, a real revealing strong preference for detached housing. Some of the weakest valuation performance, if we were looking at first quarter of 2020 pre-pandemic to first quarter of [00:18:00] 2021 was for a high-rise multi-family rental buildings in downtown markets. Their prices were kind of flat to down a bit. Now, in the latest data through the second quarter, we're beginning to see some improvement. The apartment market has really picked up even for the multifamily properties in downtown areas. Comparing Q2 to Q2, and again, Q2 2020 was a lousy quarter [laughs] for the housing market. If we compare Q2 2020, first quarter of the pandemic to second quarter of 2021, we have seen a pickup in demand and activity even in high-rise buildings. Again, a real shift in consumer preferences for single-family detached, next for single-family attached, next for garden-style apartments and suburban communities, and then least for high-rise apartment buildings in the urban core. Kathy: Which must be why so many institutional funds are really looking at the build-to-rent scenario that build-to-rent communities where people can live in a single-family home, community horizontal apartment, basically. Do you think there could be overbuilding in that sector? Frank: It's a little too early to tell. I don't think so. I think there's going to be a good degree of appetite for a single-family rental homes going forward. Partly because of the work remotely. Partly, because of some lingering or concerns about the pandemic. I think we're going to see some pretty strong demand for single-family rental in the next couple of years, for sure. I'm not worried about overbuilding in that build-to-rent scheme. I think that's actually a really good [00:20:00] opportunity for investors and builders to develop that market further. Kathy: Is there any asset class that's been overbuilt in your opinion at this point? Frank: In residential? Kathy: Just in general. I mean-- Frank: I have some concerns on the non-residential space because one thing we've seen with the pandemic is some question about, "Well, how much office space will we need longer-term especially if a large number of workers continue to work remotely either full-time or in some type of hybrid model?" With a hybrid model, we may see even greater use of the hoteling option in an office environment, again, to use the space much more productively. We also may see some curtailing of need for office space among companies just because of that working remotely. Of course, the retail sector is a big question mark, especially given the pandemic and the growth of online sales. I think a lot of consumers really accelerated their use of online shopping and got used to it. Some people come back to the stores absolutely but I think that might be something where the return to in-person shopping to the extent that we had it pre-pandemic, I think that'll be much slower to come back if it does come back to that level. The warehouse is doing great. Kathy: Yeah, right. Frank: Industrial space is doing great and that's partly because of all the online purchasing and that's really supported the [00:22:00] warehouse sector so [inaudible 00:22:04] are up very strongly there. Kathy: It just seems like there's so much negative news about last year 2020 it was a tough year. There was also a lot of really big positive changes that I think could come from it long term. Another is just realizing that in the past, people used to come to the office sick, they'd take some Sudafed to cover it up, they didn't want to take a sick day, they wanted to go on a vacation instead. Then the whole office would get sick and productivity would go down. Now it wouldn't be so terrible to say, "Hey, I'm sick, can I work from home, not spread it. I'll be just as effective." It just seems like people didn't really get sick as much. I didn't get a cold or you know the things that you normally get over the winter because we were all just isolated. Frank: I tell you, it's so true, Kathy, that was the case for me as well. I didn't get sick at all this past winter and usually, I come down with something and partly because I'm on the road traveling [crosstalk] different events and meeting with clients and industry groups but everything was virtual. I stayed home and I had a healthier winter as a result. I think that's a really good point about how it could have positive effects for productivity because people are staying a little healthier too. Kathy: Then just like anything, when we have change, there's opportunity and that's what we need to focus on. Not look at what we're losing so much as what we're gaining. My daughter is only 28 years old and she's got an email marketing business and it has just absolutely exploded because more and more companies are realizing they can sell online. They don't need that retail space. They don't need all those salespeople standing around asking people if they need help and the people that walk in the store don't want help. [00:24:00] Now, you can just go online. There's going to be a lot of opportunity, a lot of new jobs that just didn't exist before. There's exciting times but the big question that I think I know our audience has is, what does the future look like? That's hard to predict but when you've got access to the kind of data you have, you might have an idea where that's headed. Let's talk inflation. Is the supply-demand imbalance enough that it will last over the next few years or could that wane? Frank: I think the increase that we've seen in inflation and the broad inflation metrics is just temporary. We've got a lot of supply chain bottlenecks that are causing disruptions and that's adding to why we're seeing a spike in prices on lots of different goods. When we look at the housing market, one of the big issues is the big spike and lumber costs and other materials but especially lumber. Some of the shortages and delays in getting appliances and other tech equipment that builders would like to put into homes. That's all part of that supply chain disruption that's contributing to these delays- contributing to the delays but also adding the costs of building new homes. I think that's probably going to be temporary and still temporary. It means it could last for a few more months. As we get toward the end of this year, I think we'll see some of those supply chain disruptions wane. We'll see inflation measures start to come down once again. Longer-term, I'm thinking we're probably going to see, at the high side, two and a half percent annual inflation in the out years. Out years would be [00:26:00] 2022-2023-2024. I do think we'll return to that level. Now, that's kind of like the upper bound range that the federal reserve says it's comfortable with. If we return back to that level, I think the fed will continue to keep a very accommodative monetary policy which is just fancy language for keeping low-interest rates. If we do see inflation remain elevated for a longer period of time, there's no question the fed's going to have to clamp down and push up interest rates more quickly than they had planned and probably to a higher level than it had planned. Kathy: That's been the debate. There's so many people that want the clicks online so they start with negative news. The fed is saying that it's transitory right? That this inflation is transitory, it won't be forever. We'll see. Frank: That's what the fed is saying. Kathy: That's what the fed is saying but it also has never printed so much money in one year. It seems that whenever that happens that extra money ends up in stocks and real estate. Even if inflation across the board starts to level out, will it in stocks and real estate? I don't know. Frank: We're expecting home prices to continue rising. As you know they've been cooking pretty good double-digit annual increase our national CoreLogic home price index recorded a 15% increase in prices in May compared to the prior May. I think we're going to see real big-time double-digit home price growth numbers on an annual basis. Not only through the end of the summer but into the fall. Then we'll start to see gradual moderation in home [00:28:00] price growth. A moderation, not a decline in home prices but in moderation. Right now, we're expecting about 5% home price growth in our CoreLogic US index for 2022. That's a lot slower than today but it's still pretty good and still better than inflation. I'll tell you why we're expecting a moderation in-home price growth. It's basically two factors, it comes back to demand and supply. Mortgage rates which are record low right now, I do think they'll creep up and be a little bit higher as we get into 2022, maybe a quarter-point, maybe half a point. That will choke off some of the demand and affordability pressures because with home prices rising even higher over the next several months that's just going to make it very challenging for anyone who's been in the market shopping for a home to be able to afford the down payment, closing costs, as well as monthly payment. Between mortgage rates going a little higher and home prices going up impacting affordability, we'll see a moderation in demand. On the supply side, as the pandemic wanes, I think we'll see more homeowners being receptive to listing their home for sale. Here's an interesting factoid Kathy, the median age of an owner-occupant in the US, in a single-family home, 57 years of age. That means you know basically half of the owner-occupants are baby boomers. We know that the older population was much more at risk from the pandemic virus and as a consequence, many of those baby boomers who otherwise had been planning to list their home [00:30:00] and sale, either to downsize or maybe to relocate maybe to their retirement home, their second home or close to grandkids or whatever it may be. Many of them said, "Whoa, I'm not going to list in the middle of a pandemic, I'll wait. I'll postpone my listing until the pandemic is over." I think that's what has happened over the last 12, 15 months for that cohort. They may have been ready to sell but they said, "Whoop, I'm postponing until the pandemic is over." I got my fingers crossed but I'm hoping that when we get to 2022, pandemic will be in the history books and a lot of these older homeowners they will come on the market, list their home for sale and we'll see and increase in existing home inventory. I also think that with some of the supply bottlenecks being worked through that we're going to see more single-family home construction in early 2022. We'll see more of inventory response, more supply in the market, a little bit less demand. That's what translates into slowing of home price growth in 2022. Kathy: No home price crash in sight? Frank: No, I don't see a crash, no. That's not to say that there might be some packets, some communities, some urban markets that will see home price decline probably related to local economic conditions. Overall, in terms of the national scope, I don't see any price declines. The market is very different this time around compared to what we had seen in the last time during a great recession when prices fell. It's a very different market. Our market today is under built in terms of the housing market with low vacancy rates. Back in 2006, we had an over-built [00:32:00] housing market with high vacancy rate. It's really very different marketplace that way. It's very different too in terms of housing finance, mortgages. Back in 2006, we had all those high-risk mortgages, sub-prime, no doc loans. They're all absent from the marketplace today. Today, we have very prudent sound underwriting guidelines. That's an important difference as well. Kathy: All right. Well, Frank, it has been a really, again an honor to have you here. Thank you so much for sharing all your great wisdom. Frank: Thanks so much for having me today, Kathy. Kathy: All right. I think that was all the questions. Anything that you would say that you didn't? Frank: Yes, I think it's a good opportunity for investors who are looking to buying into residential market. I'll mention one thing, we've got a report coming out shortly on a single-family investors in the marketplace. What's so interesting during the course of 2020 was that the number of single-family homeowners bought by investors as a percent share of total sales actually was down compared to 2019. It was down because the number of first-time buyers who participated in the market in 2020 was up so much. We look at just the total number of homes bought by single-family investors in 2020. That was about the same in 2019. The [unintelligible 00:33:37] steady but that's a percent of total homes bought, it actually came down in 2020 in part because the first time home buyers and some Gen X'ers who were looking to trade up coming into the marketplace during 2020. It's also interesting if you look at it over the course of 2020. Strong investor activity in the first quarter [00:34:00] boom, pandemic hits, eviction moratorium go into place. Investors pulled back from the home purchase market in the second quarter of 2020, not knowing how the economy was going to shake out, what the federal government's response was going to be. They pulled back a bit but as the economy started to rebound pretty quickly by the end of the year, single-family investors were back in the market looking to buy homes. That's continued here in 2021. Kathy: Yes absolutely. One last thing. I've heard economists, I think Doug Duncan at Fannie Mae said there's a shortage of five million homes or eight million homes and there was another report saying we would need to build two million homes a year for the next 10 years to keep up with demand. Do you agree with that given what you said about certain people putting their house on the market maybe? I don't know, do you agree with that sentiment? Frank: I do think we have an under-built market and it really depends on the part of the country that you are looking at. For many decades now, for a long time the population in the United States, most of the growth has been in the South and in the West. For example, the latest data from the Census Bureau shows that the State with the largest net population gain in the past year was Texas and Texas has been top of the charts in terms of net population gain for the last several years, it's nothing new. Number one is Texas, number two is Florida, number three is Arizona. Those have been States that have been registering big population gains for a while, not just last year but for many, many years. I think those trends are going to continue in general for this Southern part of the US and the Western part of the US. [00:36:00] So that's in particular where we need to see more building of homes in order to meet that demand increase. When I look across different market, one market that's just booming is Phoenix. Home prices are up in Phoenix at a double-digit pace over the last year. Interesting, single-family rents in Phoenix are up at double-digit pace over the last year too. That's from Corelogic single-family rent index. That's a market that there's a lot of demand, a lot of population moving there and a lot of building going on. We need more building there as well. I do agree with the studies that have come out that conclude that the market is under-built right now. We do need to have more housing built and in particular, we need more housing built where people are moving too in those locations where there's much more population growth. Kathy: Sure. How can investors learn more from you and CoreLogic? What are your services? Frank: We've got a lot of information we put up on our website corelogic.com. Look for our intelligence pages. On the intelligence web page, we've got our recurring blogs that I and my team members write that provide our latest insights and trends on the housing and mortgage market. Also, include our reports that we put out. CoreLogic has a lot of data and products that we release such as the home price index that I've mentioned, the single-family rent index, our report on loan performance indicators such [00:38:00] as delinquency and foreclosure rate. Of course, we produce the Case-Shiller Home Price Index as well. Those are some of the recurring reports that go up there. We have a home equity report that we do once a quarter. We'll have a new home equity report coming out soon. Of course, with double-digit home price growth that means home equity wealth is rising at a pretty good clip as well. Kathy: I don't know if you know this but I got to debate Robert Shiller on Fox News in 2012 and it was very interesting because at the time, he thought it was maybe not a great to-- the headline was- his side of the debate was, it's not a great time to buy and my side was, "What do you mean? Home price have hit bottom and interest rates are low, it's the best time ever." By the end of that interview, he agreed with me. I'm going to say I won that debate. That was really fun. All right was such a pleasure to have you here on the Real Wealth Show, hope to have you back soon with more great news about what's happening in 2022. Frank: Sure, thanks for having, Kathy. Kathy: Thank you for joining us here on the Real Wealth Show. If you would like to get a little bit more data on different markets around the country that are seeing double-digit growth both in prices and rents and where there's still great opportunity to get cash flow and appreciation, you can visit realwealthshow.com for the list of cities where we have teams that find the properties, renovate them to rent condition or better and also offer ongoing property management. Many of these teams also build brand new homes for investors to buy as rental properties to meet that strong, strong demand for our rental property across the country and to help investors create an ongoing passive income for retirement. Again, at realwealthshow.com, get a list of the cities and a list of teams in those markets who can help you find rental [00:40:00] property. You'll also get referrals to insurance companies, mortgage brokers, 1031 exchange people. All kinds of resources for investors at realwealthshow.com. I'm Kathy Fettke, thanks for joining me today, we'll see you next time. Operator: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information go to realwealthshow.com.

It’s easy to make mistakes when you’re buying your first income property. But there are plenty of things you can do to avoid those rookie moves that new investors often make. Educating yourself is a good place to start, which is what this podcast is all about. And listening to stories about other challenges that other investors have had to deal with. In this episode, you’ll hear from Brandon Pritzl who works a full-time job in the aerospace industry, and just bought his first rental income property. He had his first big challenge right away, but he saw his way through that rough patch. He’s now planning on growing his portfolio to provide financial flexibility for his growing family, and he will share what he’s learned, so far, in this interview. If you’d like to become job optional with rental property income, join RealWealth for free. As a member, you'll have access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. Go to realwealthshow.com to join. Transcript [00:00:00] [music] Voiceover: You're listening to The Real Wealth Show with Kathy Fettke, the real estate investors' resource. [music] Kathy Fettke: What are some rookie moves that new investors make that you could avoid by listening to The Real Wealth Show? I am Kathy Fettke, and thanks so much for joining me here. Our guest today, Brandon, just bought his first property and learned a lot of things along the way that I thought were really, really valuable to share with you here on today's show. Brandon, welcome to The Real Wealth Show. Brandon Pritzl: Well, thanks for having me on the show. I'm happy to be here. Kathy: Let me start by saying, what inspired you to choose real estate over the stock market? You may be also invested there, but what inspired you to choose real estate? Brandon: I think a few people, I started reading that purple book, Rich Dad Poor Dad, a few years ago. My dad had been trying to get me to read that for a couple of years, and I finally got around to it and wish I would have done it a few years ago. That started my journey into self-education. I started listening to podcasts, including your show. I even read your book as well and a bunch of other books as well, as I was trying to start to build up the funds for an initial downpayment on my first property. Kathy: Tell me the things that really stood out in that process of learning, with real estate versus investments. Brandon: I think just the five ways that you can grow your wealth. It's not just dependent on people buying or selling or any whimsical changes in the stock market, you can actually be very planful and methodical, and real estate moves very slowly, comparatively. I liked the fact that [00:02:00] you could educate yourself, really hone in on what your strategy would be, which markets you want to target. Me being on the younger side, I wanted a healthy mix of a cash-flowing market with appreciation potential, knowing that I want to buy and hold for the long-term. I think real estate provided that monthly cash flow. You've got your appreciation potential, you've got your inflation hedging, you've got your tax benefits. You can do cash-out refinances down the road, you can do 1031 exchanges to defer any tax. I just thought there's a lot more advantages, going this route than maybe some other investment vehicles. Kathy: I agree. It is amazing that you can lock in these low interest rates for 30 years, while we're seeing rents go up and home prices go up. You got someone paying down your mortgage for you, you got tax benefits. That saves you even more money and then somebody else paying off your debt and creating that growth, the equity there. If you just look at fundamentals, you don't have to worry so much about markets going up or down. You just pay down the loan, or I should let someone else pay down for you and pay less in April to the IRS. Okay, good. I know when I bought my first property, there felt like so many unknowns. It just felt like this overwhelming thing, how do you even get a loan and read all those documents and look at an inspection report and so forth? I know you said Leah, our Investment Counselor at Real Wealth Network, is really helpful. What did you learn from-- Let's just start with the loan application process. Brandon: [00:04:00] I think throughout the whole process, I learned the incredible value about building a team around you. Leah being one part of that team, I found a lender that I really liked after speaking. I went and did my rounds and interviewed different vendors that I'd like to work with, and I know that you guys have your preferred list of vendors, I'm working with one of those. On the tax side, working with CPA, making sure that your property management is solid since they're the boots on the ground in that area. I think just initially coming into it, it can be a little bit overwhelming, but I think you just got to get out there and start talking to people. I think the more property management companies you talked to, the more lenders you talk to, the more well-informed you become. You can pick their brain about different questions to be asked, to be asking them. Then you start to develop different criteria that you'd be looking for as you become more exposed to it. My advice to any new person starting out would just be just to jump in and do it. Obviously, do your groundwork and some homework and a little bit of research. Kathy: You did watch a lot of webinars and listened to podcasts. There was learning that happened before you started making those phone calls. [00:05:32] Were you surprised at all at what the mortgage broker came back with, as far as what you could qualify for and how many? Brandon: Yes. I was surprised by the quantity and the rate I ended up getting. In all of my cash flow projections, I'd budgeted for a certain amount, and it came in well below, and I think that's the icing on the cake [00:06:00] for that particular deal. I think I definitely want to utilize-- I'm married as well, so utilize the 10 loans in my name and then in my wife's name so we get those 20 and then get and plan next steps after there, after that point. Kathy: I was going to ask you. Was that your ultimate goals, to get 10 each? Brandon: I think so. I'm relying on this property to be my proof of concept for my wife to get her to buy in. I think she's trusted me thus far, knowing that I've done my due diligence and research along the way. I think showing her the monthly mailbox money in the account, I've been including her on any updates from property management or any repairs that might be needed, talking through different things. She has some good gut instincts on different questions to be asking folks that I didn't even think of, so she's definitely been a great partner, in that regard. Kathy: Wonderful. It sounded like maybe now that you're having a family and starting a family of one child, do you intend to have one of you stop working at some point with the help of the cash flow? Brandon: Yes. I think that's the ultimate goal there to use real estate as a vehicle for one of us first to be job-optional and then hopefully down the road, we can both be job-optional and maybe do some passion project work. The main thing is just to be able to have flexibility to be able to set up a comfortable life for my little baby girl and any more that might follow. I think [00:08:00] that's the goal for now as I see it, that might grow and evolve and change, but right now, definitely, just to give us a little bit of flexibility. Kathy: When you look at the tax benefits you'd get from owning these 20 properties, you would just save, right off the bat, enough money that the second person wouldn't even have to work because the tax savings would cover it. The question is who quits their job first, right? Brandon: Exactly. Kathy: What did you learn? What surprised you about the kind of tax benefits you can get? Brandon: I think the more I learned about both the cash-out refinance options, being able to basically use your home as an ATM to pull cash out and redistribute that equity for other properties that will be income-producing, that and also learning about different tax exchange, two different vehicles to grow your portfolio. I think initially, what might make sense for me is probably first looking at cash-out refis, depending on how the market goes over the next few years. I probably only want to put my own money into a down payment and into one more investment and then hopefully be able to use the income generated from those income properties and any appreciation games there to get the snowball rolling, making other people's money work for me. I think those were the two standout things on the tech side that are like, "Oh, that's an aha moment." Kathy: Now, you said when you actually went to [00:10:00] acquire your first property, there were some challenges. You were working with another group and you felt like just a number. It wasn't going the way you wanted to, so you found RealWealth and started working with Leah, who was able to really look at the whole picture, and you're more than a number. She really wants to see you succeed. When you came into some issues with the inspection report on that property, what did you notice? Inspection reports never come back perfect, but what was on that report that had you walk away? Brandon: I think it was just the volume of things that were wrong. Then when going back to the seller with my list of everything that I wanted to get repaired and have them cover and deal with, I did a re-inspection after they said that they had done the work, and still, issues came back. I just had that gut feeling that this probably wasn't a team that was up to the standards of what I'm looking for. I would have hoped that I wouldn't have to do different rounds of re-inspection and that they would make the fixes to everything the first go-round. Ultimately, I just didn't feel comfortable having to go through multiple rounds and a little bit of lapses in communication there, and lack of transparencies. Kathy: Oh, I love, love, love that you're saying this. I don't know which team this is, and we didn't have to bad-mouth anybody here. Brandon: No, of course. Kathy: It is the investor's job to do their job. We can't just go and just [00:12:00] hope that something comes back. This is real estate, it has issues. The inspection report will tell you what those issues are. First and foremost, so many people skip that step. Never ever skip the step of getting a third-party expert to look, from roof to basement, what's going on in that property? Now, if you're buying a renovated property, a turnkey property, there are so many definitions for turnkey. There's probably 50 different companies who call themselves turnkey, but they all have different standards. One might think, "Oh, I just changed the carpet, now it's turnkey." Another might say, "I have completely rebuilt it with all new electrical, all new plumbing, all new everything, HVAC, and so forth." At RealWealth, we have standards that any teams that we refer people to, they're supposed to meet our real income property standards, but it's really hard for them to find those properties. Sometimes they just resell. They're called rental resells. They just resell a rental that hasn't been updated, or they provide brand new homes. There's this whole spectrum of brand new to renovated to not renovated at all. It's the investor's job to find out the condition of the property because, at the end of the day, you're the one buying it and owning it. Now it's yours, you got to deal with it. Never skip the inspection. Then what I love that you did is you went back to the seller and said, "Hey, these are issues. Which ones will you fix?" A lot of times they'll come back and say, "Oh, I'll do all of them," or some of them, or none of them. It's up to the seller. At the end of the day, it's their company. They said they fixed them and then you got a second inspection report. Did you have the inspector just go back, or did you have to pay for a full, completely new inspection? Brandon: Yes, I had to pay for a re-inspection, which was a lower price for him to go out and look at those [00:14:00] repaired items specifically. He still had findings, and stuff looked like it hadn't been fixed. If I were to go one other round, I would have asked the seller to pay for the third inspection, but I think at that point, I had just had a little bit of a bad taste in my mouth, so I ended up walking away. Kathy: Yes, that's the third point I wanted to make, is that you've already lost trust. You said there was problems with communication. They said they fixed things, they didn't. Why on earth would you go through and purchase that property? I'm going to tell you, we see, out of the thousands of people who invest, there are people who would still move forward. The reason is, "Oh," they think, "I don't want to go through that all again. I have to find a new property and get a new inspection. I already spent all this money on the inspection report. Maybe these people will get better." They go through with it, even though in their gut, they know they shouldn't. I really want to say I admire you for moving on. Was that hard for you to do? Brandon: Yes, because I was ready to pull the trigger, ready to get going, ready to get the monthly rent checks. I think it was frustrating but ultimately a great learning experience for me in sticking to my guns and what I'm looking for and my standards and ensuring that I'm working with teams that I'm comfortable with, that I trust, teams that have good communication, that follow through on what they say they're going to do because that's the kind of service that I would deliver to someone if I were in their position, so that's what I expect. I would want to only surround myself with a team that is able to follow through on that. Kathy: 100%. It's a long-term relationship. You would not want to pursue [00:16:00] a personal relationship if, at the very outset, someone is letting you down and breaking trust. Then you tried again. Where did you end up? Which city did you end up buying in? Brandon: In Cleveland, I found a great deal right in the price point, I reserved it as quickly as I could. I did my due diligence quickly and proceeded with getting it under contract. The clause was a little bit drawn out only because of delays with COVID, difficulty in getting technicians out in the middle of winter. I had identified this property in late November, and I think that was right during the height of all the bad outbreaks during COVID, so they're a little bit apprehensive letting people into the property for inspections and repairs and then having to deal with snow on the roof and all those things that the California boy doesn't really know firsthand how to deal with, I think, ultimately, it was a very good process. The team over there and the property management in place is solid. It's been a good experience for me thus far and a good market as well, meeting the needs of what I was targeting, like the mix of that cash flow and appreciation. Yes, I think, for now, I have my eye on that Cleveland market and the Cincinnati market. I know you have a great team based in Cincinnati Dayton. Kathy: We do. The problem is it's just been so hard for them to find inventory, the prices. Brandon: I know. Kathy: Cincinnati was one of the areas where prices went up the most, I think 17% since last year. It's really hard for our team to find those [00:18:00] deals, but if they can, then grab them while you can because I think with those tertiary markets, those outlying markets, national builders weren't flocking to them. There wasn't a whole lot of new inventory being brought in, yet demand is so strong. We're seeing areas that are typically flat, just skyrocketing price and making the whole narrative of cash-flow market go away right now. I'm glad you were able to find something. What was the price point in Cleveland? Brandon: Around $120,000, I think just slightly over. Kathy: Oh, that's amazing. It's amazing you can still get that today. [crosstalk] Wonderful. What's some final advice you would give to our listeners who are new to investing or just thinking that it's just a horrible, terrible headache and they don't want to do it? Brandon: I'd say, do your research, read, listen to podcasts, watch videos. I would say it's very helpful to work with an investment counselor like you have on your team. They'll really help you be able to narrow in and zero in on markets that fit your goals because no two investors' goals are the same. What might work for me might not be the best fit for someone else. Doing your research, identifying what's important to you, what your goals are, and then talking with the investment counselor to zero in on those markets that meet those needs. I think now it's just a waiting game and got to act fast once some inventory becomes available. I'm hoping later this year, as things start to open up, we start to see a little bit more inventory become available. [00:20:00] I think those would be my pieces of advice and also just sticking to your guns in what your standards are and not really compromising on that because it's a long-term game, it's a marathon, not a sprint. You want to have good partnerships and team members in place that will have your back for the long haul. Kathy: Oh, I love that. You want to be in a good-- You need to be well-prepared for a marathon, and you need to be well-prepared for building your portfolio in real estate, absolutely. All right. It's been such a pleasure to have you here on The Real Wealth Show, and thank you so much for sharing the ups and the downs in the whole process of investing and getting started. I really appreciate it. Brandon: Of course. I appreciate you taking the time. Thank you. Kathy: Well, we hope to have you back when you're up to 10. Brandon: I'd love to. All right, thank you. Kathy: All right, take care. Thank you for joining me here on The Real Wealth Show. You can get access to hundreds of educational webinars for free at our website at realwealthshow.com. You'll also get access to different property teams across the country, really highly recommended by our members, who can help you buy an investment property that's been already renovated or is brand new with property management in place and sometimes tenants already in the properties for a kind of done-for-you investment property. You can get access to that information again at realwealthshow.com. All you have to do is join, and it's free to join. All right, have a wonderful rest of your day. Lets's see you next time, bye-bye. Voiceover: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:21:58] [END OF AUDIO]

There’s a lot of talk about mortgage rates and whether they are heading higher. But they’ve actually gone down for several weeks, and some experts see that downward trend continuing, for at least two years. There’s even better news about refinancing loans, that we’ll hear more about in this episode. Our guest today is Caeli Ridge. She’s president and CEO of Ridge Lending Group which is focused on helping homeowners and investors realize their dreams of homeownership. She’s been an established real estate investor herself for more than 20 years with as many as 42 investment properties at one time, and she’s dedicated to helping others do the same. Join RealWealth today to find out how to build wealth with new and renovated single-family rentals. Membership is free, and will give you access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. To join, go to realwealthshow.com. Go to www.RealWealthShow.com for more information or to listen to past episodes. Transcript [00:00:00] [music] Voice Over: You're listening to The Real Wealth Show with Kathy Fettke, the real estate investors resource. Kathy Fettke: Are interest rates going to go up? If so, how would that affect the housing market? I'm Kathy Fettke and welcome to The Real Wealth Show. Our guest today, Caeli Ridge, is an expert in these things. She is president and CEO of Ridge Lending Group and has been an established real estate investor for over 20 years, holding as many as 42 investment properties across the United States, and is helping other investors do the same. Caeli, it's so great to have you back here on The Real Wealth Show. Welcome. Caeli Ridge: Thank you, Kathy. I love being here. It's my pleasure. Hopefully, I'll be able to impart some valuable insight today. Kathy: I'm sure you will and you're so cute because you're like, "Oh, is this video today? Because I just got back from the gym." [laughs] Caeli: It is what it is. Kathy: I said, I don't know, somehow over the last year it became video and I also just finished yoga. Here we are. That's the beauty of working from home. Let's talk about interest rates there. There are a lot of experts saying that they probably will creep up, but not too much, but eventually, they might. There's a lot of unknowns here. What are your thoughts on it? Caeli: A couple of things. Actually, there's some great news that we just got last week, but I'll come to that at the end. That'll be my hook for everybody. We've actually been seeing since somewhere around February of this year, rates start to increase, creep up a little bit, largely initially due to inflationary concerns. We were seeing some of that and then specific for non-owner occupied, our investors, and second home occupancy, there was an announcement back in March, March 10th, I think, to be specific. Fannie and Freddie released that-- This gets a little technical. I'm going to try and abbreviate, that they were going to be increasing [00:02:00] their risk layer for the non-owner-occupied properties. They have a senior preferred stock agreement with the treasury, which by the way, is purchasing or has been purchasing mortgage-backed securities for the last 18 months at the tune of $40 billion per week. The treasury has quite a bit of weight that they can throw around and for those two-- Kathy: [unintelligible 00:02:26] $40 billion dollars these days? Come on. [chuckles] Caeli: I was writing a check a week, mind you, a week. With all of that and thank God for it. The treasury has actually really been helping throughout the pandemic, et cetera, to keep the interest rates as low as possible so that the affordability is better for homeowners, potential home buyers, et cetera, refi cash out, yadda, yadda. They released this announcement. The Treasury wants to limit some exposure and some risk. They are maxing out the purchase per aggregator. That means that I let's say I've got $10 million worth of mortgage-backed securities or loans that I'm going to resell on the secondary market, we have dozens of aggregators that we will sell these bundles of loans to on a per aggregator per cell basis. The maximum of that bundle of loans for non-owner occupied and second home can not exceed 7%. That news created a flurry of activity on the secondary markets and increased rates for non-owner and second home. From February to now, we've really seen some significant increase rates. Rates increased, I'd say by about a full percentage point, we were at 3.5% back in February, we've been running at about 4.5% for the last five-ish months now. Here's that hit or hook rather. This is good news. Anybody that's been paying attention to interest rates remembers last year, the FHFA had added an adverse marketing [00:04:00] fee for all refinances. Do you remember hearing about that? It was a 0.5% fee for refinances back in June, I think it was. The Biden administration just canceled that. That's gone. It's effective August 1st. We're expecting to see any time. I think they just announced this Thursday or Friday last week. That removal of the adverse marketing fee for refinances should improve rates. Now, by how much? It will be a TBD, but I would expect-- Again, if you're at 4.5% on a cash-out refinance, somewhere in August or early later this month, maybe we'll be at 4%, 4.25%. See that? Some good news. We might see some additional refi boom pick back up over the course of the next few months. Kathy: Could You just summarize that for somebody who's new to the concept? What does this mean for the real estate investor? Caeli: This means that interest rates, at least for refinance, are going to be reducing, I think, by a substantial click, maybe a 0.25%, 0.375% in the next coming weeks. We will see some improvement for refinance transactions on the 30 year fixed mortgage rate. I think that in general for purchases, as rates are concerned, as herd immunity continues to become more prevalent and servicing chains and things start to open back up, supply chains, et cetera, rates are going to come back down a little bit as well on purchases. For the next couple of years, while we're getting through this recovery, I do think rates are going to remain on this low end. They are up a little bit now, but let's put that into perspective. We're still in some 5% interest rates on investment properties for 30 year fixed mortgages. In summation, rates are low. I think they're going to get a little bit lower over the next weeks, months, depending on the transaction type. They're going to stay low for the next of years. Kathy: If somebody did get a higher rate [00:06:00] recently, when can they refi into a low rate? Caeli: Excellent. Typically speaking, you want to see-- `It really depends on how long they're going to keep the property. The math to figure out your breakeven is, figure out the monthly payment difference between the rate that you're paying now and what the refinance rate would be. Take that monthly payment difference and divide it by the cost of the loan. Let's say it's a hundred dollars a month, divide that by 5,000 in closing costs, just for example, that's 50 months recapture. If you're going to keep the property for at least 50 months, it probably makes sense to go ahead and refinance. Now, keeping in mind too, that you'll have some tax advantage rate points that you might pay so that probably should work into the equation, but that's the math that you should use. You have to figure out how long you're going to keep the property, and then you can decide if it makes sense or not based on the savings and costs. Kathy: I've been getting phone calls from lenders who would like to refi and offer really low rates. We came really close [00:07:00] to doing one of them until I took a deeper dive into the fees and then the reset of the 30 year fixed. It basically brought us back to paying a lot more of the interest, whereas the loan I was currently and we were paying more of the principal. It actually ended up being a horrible deal for us, even though it looked good. It was a lower rate, too high a fees. It restarts that loan where you're paying more interest and debt. How does that work with a 30 year fixed? That's how it works. In the first 5, 10 years, you're paying primarily interest. Caeli: Correct, yes. The first 10 even plus 90% plus of what your payment is going is going to be for interest. It's not until the back end of that loan that you start really plunking down on the principal. This might be a good segue into a fun statistic and depending [00:08:00] on the circumstances, it's very circumstantial and it depends on the property, what their plans are, et cetera.That can be a fluid thing. When we talk about 30 year fixed mortgages, especially for investors, I think it would be important to mention to your listeners that the life cycle, the average life span rather of a 30 year fixed mortgage for investment property is probably five or six years. The percentage of investors that start on day one with a 30 year fixed mortgage and keep that loan for 360 months is less than 1%. Depending on the circumstances, I would just be aware of some of those details too, when making a decision. There's a psychology about that 30 year fixed that I think makes people warm and fuzzy and it helps them sleep better at night. I can get it. I have some of it myself, but the reality is that pay attention to the intent of what that investment is meant to be. If it's your primary residence, probably a different conversation, but in any case, that would be my response. Kathy: That is a conversation rich and I have all the time. He likes the comfort of that 30 year fixed. He just doesn't want to regret it in the future if interest rates are much higher. Then we have to refi at that time. He'll pay more for that [chuckles] comfort. What is it that you recommend? I think you just said. Caeli: Sure. First of all, I wouldn't say, for investors-- We're going to just focus on the investor. I would say away from a shorter amortization loan, always. Let me get into that first. I get a lot of questions about what are 15 year interest rates? They're going to be lower than a 30 year fixed rate. However, there's no need. Even if you want to accelerate the payoff early, there's no need to look at a shorter-term amortization because you can do exactly the same thing on a 30 year amortization. Even though the interest rate is higher by simply calculating that payment difference between the lower 15-year rate and the higher 30-year rate. Let's just [00:10:00] say it's $300 a month, whatever the number is, take that monthly payment difference and apply it with your 30 year fixed payment every month, you'll cross the finish line in about 15.4 years, I think, is the average calculation. Most importantly, and the reason I bring this up, is that the 30 year amortized loan is going to maximize or optimize the individual's qualification in their DTI. That 15 year payment is going to be significantly higher. In turn, it's going to affect a debt to income ratio, DTI. There's no reason to look at a 15 year. I definitely advise my clients, always take a 30 year. Whether you accelerate the payoff quicker or not is entirely up to you. You never pay the higher interest if you're doing that because you pay off so quickly. That would be the first thing. The other thing I would say is, usually speaking, I like to see a recapture when we're talking about refinance. I think that's the question. I'd like to see the recap rate somewhere in that three to five-year window of breakeven, cost versus savings. Again, depending on what their, if they know what their long-term plans are. If they know that they're going to sell this thing in a year or two years, then probably doesn't make sense to refinance, but if they just refinance and they know they're going to have it in five years from now. I'd say, look at the numbers at least and do the math. Kathy: That's just great. That's so many questions when it comes to loans. All right. Where do you see rates going with your crystal ball? I know you get asked that all the time, but let's say by the end of this year, by the end of next year, and five years from now. [chuckles] Caeli: Again, come fall early fall, mid-fall, I think that we'll start to see rates come down a little bit from where they are now. We already talked about the adverse refi fee is going to be going away in August. That just in and of itself is going to create some reduced interest rates. We can feel pretty comfortable and confident that rates are still going to be in the mid-threes, [00:12:00] high-threes, mid-fours range at least for this year. Beyond that, I really hate predicting even past a week. There are so many different variables that can create-- Kathy: [chuckles] It's really hard. Caeli: Totally. Here's my overall consensus. If you think about the amount of debt as a company or as a country we have amassed over the last 18 months, the servicing of that debt in and of itself is going to make it very, very difficult for the feds to increase rates. It's just not going to happen. If you think about trillions of dollars and the payment on that debt, a blip, an increase in interest rates would make millions of dollars in interest. Rates are going to stay low during recovery is what I'm going to say to that question. Kathy: It sure seems that way. All right. Now, another question of course we have is the forbearance and that is ending in September, correct? Do you see that increasing inventory at that time? Caeli: I did a webinar not too long ago. When this topic came up, initially, I thought, yes, maybe. It's just an unfortunate casualty of the pandemic and the forbearance, in particular, we will see some foreclosures. However, I don't think it's going to be as much as people originally maybe thought. I don't think that the Biden administration is going to allow that. I think that there'll be provisions that will try to remove as much of that as possible. I would not expect a huge flurry of extra inventory on the market. I do think that as lumber prices, whoever's following that, they just took a huge nosedive recently. Quick numbers, last year, I want to say March, something, the cost per square board, I think, is how it's measured was $333. Up until a couple of weeks ago, I think it was $1600, right? It was insane. It took a big dip. Those supply chains [00:14:00] are going to opening up. For those reasons and in several others, I think we'll start to see a little bit more inventory. I'm hoping that some of these factors will help lighten the frenzy, the marketplace, so that it's a little bit less competitive and prices start to just-- We always want to see an upward trajectory, but I'm sure you'll agree, Cathy, with the way in which they're going right now, it's a steep climb, it's not going to be sustainable long-term. I think the market will correct though. Kathy: All right. Let's see, what else? Eviction moratorium too. I know that you, as a lender, focus mainly on investor properties. I would think this is something that you're looking at. You don't want to see a bunch of landlords who have borrowed money from you or from the banks you work with, suddenly not have income. Are you concerned about that? Caeli: I feel like a lot of what has come across my desk anyway has been relatively well handled. I think that landlords have been forced to get pretty creative. We haven't seen too much of that. When things were really at their hairiest, they were finding ways to equal compromises, maybe pay a portion of the rents. Give them instructions on where to find unemployments in their areas. I mean, job listings, right? They were really getting super creative in how to help their tenants make sure that they could pay their rent. I think that most people have done a pretty decent job of avoiding that thing. Kathy: What about cash-out refi? Are you seeing demand for that? If so, are you concerned or is it a good thing? [00:16:00] Caeli: No, I loved the cash-out refinance and we've been talking about rates. Rates are still incredibly low. Most people are aware, but for those that are not, a cash-out refinance of an investment property is non-taxable. Borrowed funds are non-taxable. Taking some of the equity with the appreciation that we're seeing right now and utilizing it to deploy for further purchases, I love the idea. Yes, 100% go cash-out refi. We think that rates are going to get a little bit better in the coming weeks too. By all means, I think cash-out refi as a general rule is going to start to get some more steam. Kathy: How much more expensive is it from just a regular refi to a cash-out? Caeli: In interest rate, probably about 0.375%. Kathy: Not too much more to be able to, like you said, deploy those funds and purchase more properties. Now, once you sell that property, it's at that time that the government will want their money unless you do a 1031. Hopefully, that 1031 stays in play. Even with the way that the Biden administration is looking at it, it seems to affect just higher-cost properties versus the ones that our members are looking at. I haven't been too worried about it, but time will tell. It takes a long time to change the tax law. It's not easy. What about adjustable-rate mortgages? I know, we mentioned that, but do you see a comeback there? Caeli: I like an adjustable-rate mortgage, to be honest with you on it. For reasons that we talked about earlier, there's a psychology to 30 year fixed versus the adjustable rate, but statistics tell us again that the lifespan of a 30 year fixed, especially for the non-owner occupied, is in that five or six range window. right now, today, as we're talking, the secondary markets for interest rates are on what we call an inverted yield. That means in simple terms that a 30 year fixed [00:18:00] mortgage has a lower interest rate than an adjustable-rate. It's lopsided, it's inverted. Under normal circumstances, the only reason to take an adjustable is if the interest rate is lower. Usually, by about a percentage point is what we tend to see. Right now, adjusted rate mortgages, no, there's no incentive to do that. I do believe that we will see that shift at some point probably once they really figure out what to do with the conservatorship of Fannie, Freddie. Again, this gets into the weeds so I'll abbreviate, but '08, '09 crash. Dodd-Frank all of those elements is when we saw that inverted yield, adjusted rate mortgages, interest rates went up, 30 year fixed low, don't even look at the adjustable. Once we start to really look at how to release Fannie, Freddie from its conservatorship that they were put in back in 2010, I think it was, I think that we'll start to see those adjustable rate mortgages make a play again in the open market to where it does make sense to consider if the interest rates are that 0.375% to 1% plus lower than a 30 year fixed counterpart. Kathy: Now, I had read, and I think we did a story on it that there was less funding available through Fannie and Freddie or the requirements were getting stricter for investment properties. Is that correct? Caeli: Not that I'm aware of. As a [unintelligible 00:19:25] you mean? Not really. Kathy: No, it was at banks had a maximum number of investor loans they could do, something like that. Caeli: There's probably something, maybe if you've heard, there's are things called overlays. Overlay is just an added requirement or risk to what the already predisposed guideline, Fannie, Freddie guidelines says, There's something called the seller's guide that Fannie, Freddie published. This is a 1400 page document that, within crazy detail, told us [00:20:00] exactly what the loan has to meet in order for it to be insurable by the United States government. Ridge, because we're so investor-friendly, we go straight by the seller's guide. A lot of banks out there are going to impose these overlays that add into, for layers of risk, a maximum number that they'll finance for one individual, maybe it's 4. The rule is 10. Fannie Freddie will allow up to 10 finance properties per qualified individual. For husband and wife, for example, one of the things that we coach or counsel is that if they can, we want to qualify them separately from each other independent so now we have 10 golden tickets, we call them golden tickets, highest leverage lowest interest rate, so that they can maximize those spots. I think that's one of the things value-add wise that that Ridge does for its clients is it's looking for education and teaching them how to optimize qualifications and what to look for. Tennis is what Fannie, Freddie says. We don't stop at 10. We've got a whole diverse menu of loan products for investors that go well beyond, but that's what the actual guideline says and we don't impose those overlays. Kathy: That's fascinating. Let's say a family, maxes there 10, the wife and the husband have now maxed out. They have 10 each or it's a single person who's reached their 10 limit. What are their options today and are they expensive? Caeli: There are several. Two, to be specific. There's something called non-QM. Fannie Mae and Freddie Mac are defined as QM, qualified mortgages. Everything outside of that box is now non-QM. Non-QM in it of itself is very diverse. It's not just for investors. It's for anybody, really, that just doesn't fit into that box. There are no limits to the number of finance properties an individual can have using non-QM terms. Just specific to this piece, non-QM has a whole variety of things for investors, [00:22:00] but this one just as it means that you have maxed out your Fannie, Freddie 10. Guidelines are pretty much the same. Qualifying guidelines, if it's full doc, income debt to income ratio, assets credit, very similar, leverage is pretty similar. 75%, 80% leverage, 30 year fixed. The difference is going to be rate. The costs are going to be the same. It's really going to boil down to rate. Right now it's about a point difference between Fannie, Freddie and, let's say, a non-QM. If you're 4.25% on a Fannie Freddie loan, you can expect the non-QM to be somewhere around 5.25%. Otherwise, it's the same. Kathy: Which is really helpful. I know you've helped a lot of our members who are in the middle of a 1031 and they forgot about this detail. They have to get another loan on the replacement property and maybe they've already maxed out with Fannie and Freddie. They come to you and you fix that problem. You get them the loans they need. Caeli: Yes. That's true. Kathy: That can be stressful. Plan ahead if you're doing a 1031. [chuckles] Any other tips for investors when it comes to leverage? Caeli: I would say plan ahead is a great segue to close out the conversation. Planning ahead, make sure you get pre-qualified in advance of getting out there and starting to make offers. You want to get your financial debts in a row. Again, Ridge is really going to focus on educating you and teaching you, not from, real in-depth levels, but baseline stuff so that you understand the mechanics. What's going on in the black box of underwriting guidelines, how it applies to you, and certainly the goals and taking all of that and understanding what moves not to make. Because you don't know what you don't know and having some of that baseline information, I think, is crucial to your overall success. I want to leave people with that and we really focus a lot of our attention on [00:24:00] that education. That's why I like your platform too, Kathy, because you guys are educators and it's just so important. Somebody getting into real estate investing just on its own without even the financing part added in, they're drinking through a firehose. That's the analogy that I give. There are a lot of moving parts. Just taking some time to educate yourself and aligning yourself with educators is just so, so important. I'm grateful for you and that platform and Ridge follow suit. Kathy: Absolutely. I see too often people who have a toe in the water, maybe a real estate agent that just works very, very part-time and they think they know everything [chuckles] and they may be talking about something that was true 10 years ago. We really want to get the education from somebody who's active. Who's very, very involved with what's going on today and has been doing it a long time. That would be you for sure. It's a family business, right? Your dad did it before you, so you grew up in it. Caeli: That's right. Second generation. Dad is retired now in Southern Florida, Santa Rosa Beach, the panhandle, and living life. I took over. Kathy: You're still in Oregon. Caeli: Yes, our corporate offices are in Oregon, but for those that maybe don't know, we're licensed nationwide. Kathy: Yes, that's right. You can help people get loans definitely in all the markets that Real Wealth network has been involved in. Caeli, always a pleasure to speak with you. It's so great to connect. It almost feels like we're in the same room. Thank you so much and have a wonderful rest of your day. Caeli: You too. Kathy: Thank you for joining me here on The Real Wealth Show. You can find out more about the various lenders that we work with and resources under our resources tab under our invest tab at realwealthshow.com. There you'll get referrals to people with the kind of experience that you saw with Caeli today and also property teams in some of those strongest, fastest-[00:26:00] growing markets who acquire the investment properties, get them to rent-ready condition, or build them brand new and provide ongoing property management for our members who want to own rental property out of state. Again, you can get more information@realwealthshow.com. I'm Kathy Fettke. Thanks so much for joining me. We'll see you next time. Bye-bye [music] Voice Over: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com.

In this episode of the Real Wealth show, we'll peek behind the curtain to see the reality of buy and hold investing. Our guest will talk about the good, the bad, and the ugly of being a landlord, and how patience and perseverance can really pay off. Brent Palmer lives with his wife in the San Francisco Bay Area. His investing story begins with a full-time job as an engineer, two side jobs, and a desire to get off the work treadmill. After listening to the Real Wealth Show, joining as a member, and attending live events, he pulled the trigger and bought three properties in Kansas City. Those first investments came with challenges however, but he stuck with it, bought more single-family rentals in a different market, and has been able to quit those two side jobs. You'll hear his Real Wealth story in this interview. If you’d like to become job optional by investing in rental property, join RealWealth for free by visiting RealWealthShow.com. As as a member, you'll have access to the Investor Portal where you can speak with one of our experienced investment counselors, view sample property pro formas, and connect with our network of resources, including property teams, CPAs, attorneys, lenders, 1031 exchange facilitators, and more. Subscribe to the show on Apple Podcasts and get the latest episodes uploaded to your device as soon as they are released. Like what you hear? Throw some stars our way and leave us a review! We appreciate you! Transcript: [00:00:00] [music] Announcer: You're listening to The RealWealth Show, with Kathy Fettke, the real estate investor's resource. [music] Kathy Fettke: On today's RealWealth Show, we're going to peek behind the curtain to see the reality of buy-and-hold real estate investing; the good, the bad, and the ugly and how, when you stick with it, it really can turn out very well in the end. I'm Kathy Fettke, and welcome to The RealWealth Show. Our guest today was feeling overworked, on a treadmill. Even with an electrical engineering degree, he was having trouble keeping up with the very expensive San Francisco Bay Area and he didn't see a way off of that treadmill. Then he listened to The RealWealth Show and joined as a member at RealWealth Network, and started attending our live events. At that time, he pulled the trigger, and bought three properties in Kansas City. Even though those first properties have come with their share of challenges, Brent is still on a mission to build his real estate portfolio. So far, it's allowed him to quit his two side jobs. Brent, welcome to The RealWealth Show. Let's talk about when and why you started looking at real estate as a vehicle for retirement and investing. Brent Palmer: Well, I was aware of you, Kathy. I had heard you on KSFO, talking of one of the financial gurus, maybe about 10 years ago. I was so touched. Kathy: That was so long ago. Oh, my gosh, that's funny. KSFO, yes. Brent: Right. That buzzed around in my head for a time. I was here in the Bay Area. I had graduated from Cal Poly San Luis Obispo in 2006. We were quite fortunate, my wife and I, to land a house during the recession. Kathy: Wow. Brent: Right. We got a really great deal on our place. Impossible now, of course, but that was a huge help as far as having that. Upon graduating with my engineering degree, I had this crazy notion, [00:02:00] "Well, wife, you can go ahead and stay at home, and I'll be the breadwinner." She was able to stay at home with our children for a while. That was really great, but I was a little naïve as far as Bay Area cost of living. Thankfully, we got the house, but still, I was having to work multiple jobs. In addition to my main engineering job, I was working for a couple of tutoring firms on the side, doing statistics and math tutoring for high school students. I was staying pretty busy with that. It was just not an ideal situation, financially. I was looking for a way to get out from that, and really just be able to have one main job. I was aware of you and so I started looking into the RealWealth Network. I signed up as a member and looked at your material, started attending live events. That was maybe about six or seven years ago, and attended live events for a period of time, maybe. Not a hugely long period of time, but perhaps, maybe over the course of a year, I attended several events. It just got really comfortable. Then I talked with my advisor, Aristotle. It just felt really like a comparable thing, to go ahead and land that first property and try to transition out of working so much. I met with an affiliate provider in the Kansas City area. I know currently, from what I understand, RealWealth doesn't have a provider in that area, but anyway. At the time, there was somebody so I flew out there, got the lay of the land, was shown around of what rehabs looked like, what completed properties looked like. I went ahead, and this was in 2016, in the span of about nine months, acquired three [00:04:00] properties. Then I set up-- Kathy: Wow. All in Kansas City. That was probably a big learning curve there. Brent: That was a big learning curve. I had stayed, of course, quite busy with my jobs, but I ended up making the transition with my main day job to another employer and so I had some company stock. That helped me then to go ahead and be able to get the funds for procuring those properties, because I was just busy. It was like, "How are you going to get the funds here to go ahead and procure a property?" That just helped. It definitely made it possible for me to get those properties. I know that's not for everybody, but I'll admit I had listened to some Keith Weinhold as well and that influenced me, where if you're in a rough situation, just go ahead and take the tax hit. I was young enough. I felt my risk tolerance was high enough, that I was comfortable going ahead and using those funds that were for the company's stock, and going ahead and using those as down payments for my three properties in the Kansas City area. Kathy: Yes, as you mentioned, we're not working in Kansas City anymore. I think it's a great place. We just didn't have luck with property management there. We had difficulty with the older homes. It was a tough market, even though there's a lot of growth there, at least for us. I know that you experience some of that. What's the ugly side of real estate, and investing out-of-state that people need to hear. Brent: Right. That's true. That was a challenging market. I was definitely gung-ho because I wanted so much to be able to quit my side jobs, [00:06:00] and just have more time. I grabbed those three properties. Unfortunately, one of them did get placed with a bad tenant. I can't recall. It might have been actually the second tenant on one of those. She looked good on paper. She passed the background check, looked good. She had a job with Kansas City Medical Center even. That Kansas City affiliate actually had brought in and developed a property management company in-house. I was with that property management company. At the time this tenant was giving me grief was about the same time that that property manager actually folded. I wasn't aware. She had actually left town, and left the bathtub faucet on and at full blast. Kathy: Oh my gosh. What a-- Brent: Yes, I was faced with an astronomical water in utility bill. [chuckles] Kathy: What about damage to the house? Brent: I was fortunate in that the rehab had been done well enough to where-- the tub didn't overflow, the piping was good. Kathy: It was just water loss. Oh, my gosh. That would be a real crime. You'd get arrested for that in California. We can't waste water like that. [laughs] Oh, my gosh. Brent: Right, pretty hard. Kathy: Do you think she just forgot? Brent: I'm sorry. Kathy: Do you think she just forgot to turn it off, or intentionally--? Brent: No because, let's say, I had photos of some other parts of the house that definitely would indicate no. There was, I think, some intention with that [chuckles]. I don't know. She didn't know me from Adam, but anyway. Kathy: You're "the greedy landlord", I guess. I don't know. Oh, I'm so sorry. You had water bills. [00:08:00] Sometimes, in certain states, there is a lesson there, that if the tenant doesn't pay the water bill, it's stuck with the landlord, right? Brent: That's true. That's a good point. Right. I was hit with all the utilities. Then, just of course, I did an expensive make-ready to prepare for the next tenant on that, and transition with the new property manager. It was definitely an eye-opening experience. It's good that we stress this here. It's not always going to be a smooth experience. This was early on for me. It was definitely rough sailing for a bit of time there, to get the safe-- Kathy: Did you doubt yourself at that point? Like, "Oh my gosh. Here, I thought this was going to be my answer and instead, it's just more stress and more headache." Brent: [chuckles] To be honest with you, I didn't immediately quit my side jobs. I was still really busy and, thankfully, I had the funds to deal with it. That's why it's so important to have your reserve funds. When you're working with your lender and they want to see that, that's why you have reserve funds. I just ate it. Of course, I undertook legal proceedings with her, but nothing. We weren't able to track her. She just skipped town. To me, I was just so busy, it's like, "I'll just deal with that." I wasn't pleased about it, but I just felt it would work itself out over time. I was willing to be patient because I had heard enough people say real estate is not a get-rich-quick type of scheme so I was-- Kathy: That's a great attitude. That's a great attitude because things do happen and the odds are, eventually, it does happened to you, but that is why the reserves are in place. I'd recommend at least $5,000, set aside for property, or six months to 12 months of the rent, set aside. If you just have it in your [00:10:00] head, "This is for times like this, so I don't have to worry about it. I'm not going to be upset about it. It's just part of the cost of doing business." We have that in our actual business. We have emergency funds and a fund for legal in case that comes up. Then when it comes up, you don't stress about it. Brent: Exactly, because I think the water alone because of the tiered system, the water I think it was over $2,000 digitally. Kathy: Oh gosh, please. How are those properties doing now? Brent: Of course, as you said, RealWealth doesn't have an affiliate in that area, but there was a property manager who overtook the properties for RealWealth Network members who were in that situation with that particular previous property manager folding. I stayed with that particular provider over time and developed a trust with them there. It hasn't been totally smooth as far as tenants. Maybe that's why you folks aren't in that area right now, but I actually I'm currently dealing with another tenant right now who's, this is very recent, he's trying to squat on a property. We will see how that goes. Kathy: I know other people who have done really well in Kansas City, but we just have not. We tried probably four different providers and couldn't make it work, even though I think it's a great city. It's a growing city. There's a lot of positives. I'm sorry that you're dealing with that. It could happen anywhere, but it does sometimes. Sometimes in situations like that, I just sell the house and say, "This is just bad luck," [laughs] and I go get something else. Brent: Yes, I'm actually considering that. We'll see how things go. I think partly might be due to the COVID situation and people's [00:12:00] finances is that he qualified for a property, now he doesn't want top up the funds for rent. We'll see how it goes. Kathy: Oh, boy. What are some of the lessons you've learned and how are things going now in general? Do you still believe in real estate? Brent: Absolutely. Again, it's not a get-rich-quick scheme. I haven't quantized it. Here I'm an engineer but I haven't quantized exactly what I'm netting per month. I have seen it improve my finances. Even in the worst-case scenario, you're still building wealth in the sense that you're making payments or your tenant is making payments on a property and over time, you're going to own that property and you'll see rents go up over time. There's still a benefit there. That's definitely one thing I've learned is just be patient and be content. As far as how are things going on, I actually have diversified. I've got two properties in Indianapolis as well. I am currently, as we speak, working on acquiring a third. In addition, I mentioned I spent some funds to acquire downs, which I think for a lot of people might be a challenge. People look and think, "How am I ever going to acquire real estate?" The downs are not huge of course relative to California real estate. I was able additionally because we got our house here in the Bay Area, I was able to use a couple of cash-out refis. I think both of those were for the Indianapolis properties. Now one of the properties I've had for about three years in Indianapolis. We are using the equity in that house [00:14:00] now to tap in and acquire a third property in Indianapolis. It's rewarding because we got in, rates were higher at the time, interest rates were higher. We've seen them come down and now, we're going to cash in on the equity and acquire an additional property in Indianapolis. That's been a much better market for me, has been very smooth sailing. I'm staying in Indianapolis for the time being and keep adding on one or maybe two properties this year, and we'll see how things go. Kathy: Great. What's your ultimate goal in terms of real estate and in life? [chuckles] Brent: [chuckles] Initially, it was simply to acquire-- The immediate need after meeting with Aristotle was simply to acquire three properties. We figured that would be enough for me to be able to quit the side jobs and focus on the day job and then real estate on the side. It's really a blessing to be able to go beyond that. At first, I didn't have any hopes. I was having trouble seeing how am I going to go beyond three? Now, we've been able to look at other means of financing these properties for the downs. We're continuing to go forward. I think I have other cash reserves or other equity in other properties that I can tap into as well so I'm not eating up cash on my end to try to fund the downs for these properties. I'm just going to keep going, probably try to add maybe one a year for the time being. This will be six for me, and then I also structured my primary residence so that that loan is all under my name. I'll be at 7 then of the golden 10 as you call them for the golden parachutes for my real estate number, and then we'll probably try to focus on my life and structure it that way. We've definitely tried to hear and listen to [00:16:00] your advice, Kathy, for structuring our portfolio. Then as well over time, there are processes I need to get more efficient on as far as probably work on developing spreadsheets, keeping better track of things. Then the legal end we're working on. I got some paperwork I'm probably going to be doing this week for the RealWealth Network's recommended legal provider. Because I have had some bleeding with property, just trying to shore up the bleeding as I go along and get more disciplined and more structured. Kathy: What would more disciplined look like? Would your acquisition process be different? Brent: I think it's just developing a better tracking program of costs. My property manager does a good job of all of that. As far as the asset protection, I know there's a recommendation to have I think separate possibly banking accounts for each properties, you develop the LLCs. I haven't gone to that level of detail. I need to work on that more. It's just trying to have bulletproof, I guess, asset protection and be more disciplined. I'm trying to develop this as I'm running along the way. Obviously, I got three children, family needs and so it's definitely busy trying to get all the stuff in. Kathy: Everybody has different opinions on how much asset protection they need. I personally don't have separate bank accounts for my properties. If they're highly leveraged properties, then I put them together in one LLC, but again, that's just me. I just figure there's not enough in them that someone would try to go after [00:18:00] properties that are highly leveraged within one LLC. Again, that's a discussion you have with your attorney. I love that you're looking at how can I run this more like a business? What's my criteria for acquisition? What do I need to be looking for? Is it a certain amount of cash flow? Is it a certain amount of growth in the area, jobs, population, age of the house, renovation, brand new? What's your criteria? Then having the discipline to stick with that because sometimes you can't find it. Brent: Definitely. Kathy: Sometimes it takes a while to find exactly what's going to fit that. I'm happy to say that we do have a new marketplace at RealWealth where you can plug a lot of that in. I don't know if you've used that yet. It's brand new. We're just coming out with it, but you can put your properties in there and analyze them a little bit more easily, so check that out for sure. Brent: Right, good point. Kathy: Rich and I got a bookkeeper finally because it was just like, "It's so much detail in managing the properties once you get a lot of them." It's nice because then he presents us with a spreadsheet and we can see how our properties are really doing. I do recommend if you're too busy just get a bookkeeper. [chuckles] Brent: [chuckles] That's a good way of doing it. I had the sense of just hitting the ground running with this stuff. Of course, it was for a time just I don't want to say overwhelming but working multiple jobs and it was more than I could keep track of. Now that things have settled down a little more, just trying to refine the process. Definitely take a look at that resource. Kathy: Obviously, you all have good sense about things to be able to buy in the down market. That said, a lot of people weren't able to do that. I imagine there's a lot of equity in your primary. Have you refi that and lowered your payment there or potentially taking cash out for investing? [00:20:00] Brent: Right, we have. We've actually refinanced two or three times. I don't remember, it's either two or three of our properties we are able to use the cash-out refi proceeds and able to land those, so, yes, definitely. We may do that again. Kathy: Awesome. Yes, I know, with the [laughs] way prices have gone up. Have you noticed or even paid attention to whether the properties in Kansas City or Indianapolis have increased in value? Those tend to be markets that are linear, they don't tend to go up in value that much, but the last year has been phenomenal. Have you noticed any equity growth, Brent: Right, it has. Right now we're refinancing one of our properties in Indianapolis and we're waiting to see the inspection report and see the appraisal, and see what we get for that. I do believe has gone up, but we're just waiting to see on that pretty sure. Then we may look into the Kansas City market. With that, I mentioned I've got a tenant that we're dealing with, squatting tenants, we may possibly try to sell that property. I looked into those. I'm pretty sure Indianapolis, because those are better quality properties, has done a higher versus Kansas City. Kathy: Okay. It seems like you're at the level, almost at least, at the level of owning properties that potentially if your wife did most of the managing of it and could show 750 hours spent learning and managing your properties, she could qualify as a real estate professional if she's not working right now and help offset the taxes you're paying. Brent: Right now [00:22:00] my youngest child is eight years old. She's pretty busy with the children and she is working right now. She's supportive of this, so maybe eventually. Kathy: When a spouse doesn't have a W2 job, and they're able to show that they would spend more time on real estate, which again is 750 hours a year, then they can qualify as a real estate professional just from managing the properties, meaning taking over the bookkeeping and making sure the insurances is good and so forth. There's ways to document that. All right. Well, any other suggestions for new listeners or anybody who's thinking about getting started or investing? Some of the things you said are pretty scary. Again, I think you already said it, but what advice would you give to new investors? Brent: Be patient and don't give up. Overall, I think it's a winning proposition and I've seen things improve over time. I think real estate is really good also in the sense, for employers as well because what this has done for me is it's enabled me now that I'm not having to work the side jobs, I'm more dedicated to my primary employer. When you're able to do that-- I'm not looking to quit my day job anytime soon. I think a lot of times employers look and have their 401(k) package and all of that, but I think what we do as real estate investors is actually really good for employees when you're still working a day job because it just makes you a better asset to that employer. Kathy: Oh, that's a great point. You mentioned earlier too, you're feeling less stressed because again, you're not having that second job. How would you say on a scale of 1 to 10, [00:24:00] you've been able to create real wealth, meaning having the time and money to live life on your own terms? Brent: It was definitely at a one or a zero probably, to begin with, where I was just being pulled by the necessities of life to I have to work so much. It's improved. I'm not to the point where I'm just living off the funds of my investment properties, but I'd say it's probably up there to seven or eight. It's definitely at the higher end of the scale. Kathy: Oh my gosh. That's incredible. I love hearing that. All right, Brent, well, thank you so much for joining me here on the The RealWealth Show and inspiring our audience and showing what's behind the curtain. It's not always easy, but if you look over the long run, that $2,000 hit one day, but maybe you made that much in appreciation or in tax benefits. It's a long haul and you got people paying off the debt for you. You're going to look back, it'll just be a blip. Brent: Thank you so much. I appreciate the advice and mentoring you've given over time to those of us in the RealWealth Network. Thank you, Kathy. Kathy: Thank you so much. Brent: Definitely. Kathy: Thank you for joining me here on the The RealWealth Show. If you'd like to hear more RealWealth stories or get access to over 500 free educational webinars on everything, from asset protection to getting good insurance on your properties, to getting really good financing, you can get up to 10 investor loans that are backed by the US government with just 20% and 25% down. Then referrals to companies across the country who've helped our members at RealWealth acquire investment properties for the long-term with property management in place. You can do that at realwealthshow.com and it's free to join. I'm Kathy Fettke and we'll see you next time. Announcer: The views and opinions expressed in this podcast are provided for [00:26:00] informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:26:14] [END OF AUDIO]

Have you thought about buying a vacation property and putting it on the short-term rental market, but weren't quite sure how to manage the process? Our guests, Bryan Marks and Jimmy Woodard, have known each other since 2010 when they met as students at UC Berkeley. Since then they’ve built over a decade of experience in the tech industry, and have put their tech know-how to good use in the launch of a short-term rental business. They bought their first short-term rental just 6 months ago at Lake Tahoe and are working on a second one across the country in Miami. In this interview, they join us with some tech tips on what they've learned, so far. If you’d like to find out more about owning rental properties, including short-term rentals, join RealWealth for free by visiting RealWealthShow.com. As as a member, you'll have access to the Investor Portal where you can speak with one of our experienced investment counselors, view sample property pro formas, and connect with our network of resources, including property teams, CPAs, attorneys, lenders, 1031 exchange facilitators, and more. Go to www.RealWealthShow.com for more information or to listen to past episodes. TRANSCRIPT [00:00:00] [music] Announcer: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investor's resource. [music] Kathy Fettke: Have you thought about buying a vacation property and putting it on the short-term rental market but aren't quite sure how to go about that? I'm Kathy Fettke, and welcome to the Real Wealth Show. Our guests today, Bryan Marks and Jimmy Woodard, bought their first short-term rental property just six months ago. It's been so successful that they're doing it again, but this time across the country in Miami. They're here to give us some tips on what they've learned. Hey, Jimmy and Bryan, welcome to the Real Wealth Show. Jimmy Woodard: Thank you. Thank you for hosting us. Kathy: Just first talk about the short-term rental business, a year ago, there was a lot of concern that Airbnb wasn't even going to make it, now I don't know if those were just scary headlines. Today, I think it's been busier than ever for Airbnbs and short-term rentals and Vrbos and everything else out there. How did you guys get started? Let's just start with that. How did you get started in short-term rentals? Jimmy: Bryan, you want to take it away? Bryan Marks: Yes, thank you, Kathy, for the question. Great to be on the show. Jimmy and I actually met a long time ago, 10 years ago in college. We actually started doing short-term rentals before Airbnb was a thing. I know some people don't remember that far back, but we went to Tahoe a lot, Lake Tahoe in California, and we loved it. We had a great experience. We always had aspirations to have our own that we could use in our spare time and, then ultimately, make that into a revenue vehicle for us to generate income, passive income, which is our opinion some of the best kinds of income. Ultimately, we talked about it for years, and then recently, we made the plunge late last year. Kathy: Late last year? Okay. Jimmy: Yes, we're still new. We started back in December of last year where everything came full circle and we got our first property in Tahoe to help other people also [00:02:00] invest in short-term rentals because we want to spread wealth as far as we can through our business model. Kathy: You didn't exactly pick the cheapest market, and you also didn't exactly pick a down market. [laughs] I think that could've been the hardest time to buy vacation property in a place like Lake Tahoe. How did you get that first property? Jimmy: Actually, it's funny you mentioned that because there were multiple properties that we bid on that we got outbid. It was a very frustrating process, but what ended up happening was we came across this company called Flyhomes. I don't know if your audience are familiar with them, but they help you convert your conventional offer into an all-cash offer. They at the time didn't even exist in the Tahoe market, so we had to cold email the CEO and beg him, "Can you help us get a property?" because we kept getting outbid. It worked out where the very first time that we worked with Flyhomes, our offer, even though it wasn't the most money that was offered because it was an all-cash offer, we were able to purchase the property. I would definitely recommend them to all of your listeners. For anyone that going through that same frustrating process, keeps getting outbid, Flyhomes is a great partner that we worked with. Kathy: Oh, that's wonderful. You had to have the downpayment, or they put up the rest of the money for you so that it's cash and then you finance it after? Jimmy: Correct. Kathy: Are you guys from the San Francisco Bay Area? Jimmy: Yes. Kathy: It's just like this tech hub of awesomeness where there's just something new happening, [chuckles] something coming online all the time. I don't know if you know, but I won this award with Goldman Sachs of top 100 most intriguing entrepreneurs, which was really cool. Jimmy: Oh, nice. Kathy: I sat at a table in 2012 with these two young guys [00:04:00] who were telling me about this new business they had. It was basically they were so tired of trying to get a taxi, and I think you know where I'm going. I don't know if you remember days before Uber. Fine, I do. In San Francisco, if you were at a bar at 2:00 AM and you needed a taxi because you did need a taxi because you shouldn't be driving from a bar at 2:00 AM after drinking, you'd wait hours. These guys were literally standing on the corner watching these cars go by thinking, "I just want to jump in one of those." As they were standing on the corner, they come up with the concept for Uber. Jimmy: Got to love that. Kathy: I got to meet them at the very beginning, I didn't even know what it was. It's just really cool to see that ridesharing, and now, house-sharing, which I think is what you guys are doing now. It's only been about six months, but how's that vacation rental performing? Bryan: It's been doing great. Back to that tech story, we do have a lot of tech background, both Jimmy and I, myself being more on the engineering technical side and Jimmy being more on the sales. We did lean a lot into that. One thing that was really helpful and just for your listeners or viewers out there, there's plenty of tools called machine-learning tools where, basically, they're really good at predicting how much a home will do on these short-term rentals, whether it's Vrbo or Airbnb. We knew pretty definitively that we can build a pro forma right out the gate and actually hit really good numbers and really feel confident that we're going to get a great ROI from the property. We jumped in there and did that initially. It's been doing great. It's actually exceeded it. We've added a lot of the amenities that have proven to improve the outcome of the home and have a great experience. Something ultimately that we wanted, two things that come to mind are, one, we added a hot tub to the property. It's always great to be in the snow and then just be in the hot tub. It's really nice to [00:06:00] have. Kathy: It's a must. Jimmy: [crosstalk] Oh, yes. Bryan: It's a must. Then we added a little movie theater room, too, with very comfortable sitting and a bar area because I know, especially during COVID, people just want to be with their bubble and with their friends and family and they don't really necessarily want to go out, so we did have a bar, lounge area into the house so it felt like you could stay home and be safe while still having a good time. We added a lot of those amenities, and they paid off quite a bit. Kathy: Do you think that's going to continue because I think a lot of people forgot there was a COVID? [laughs] It's crazy out there. My daughter was showing me pictures of San Diego, and there was no sign of anyone staying home. Jimmy: Yes, they were binge spending, right? In full force right now. Kathy: Yes, [chuckles] exactly. I imagine no matter what's going on, people like having hot tubs and bars in a vacation home. One of the sites you mentioned or one of the technologies, is it AirDNA? Is that the one you use? Jimmy: Yes. Kathy: You can become a member there and get a lot of data on vacancy rates and what the average house is getting, right? We've used that before, that was really helpful. Jimmy: Yes, very helpful tool because you don't want to go in blind thinking that you buy a property here, it's going to do so well because it's in a popular city, but it's not near any attraction or it's just in a bad zone and you waste all your money because you didn't do the research upfront. We made sure to do the right homework before we invested in our first property, and we did the same thing for our second property, which we're going to launch in Miami pretty soon. Kathy: That's so cool. I had the founder of AirDNA on the show, and I didn't really-- hadn't heard of it and I didn't understand the value of it at the time. I was confused, but I think it's really taken off since then. All right, let's talk about Miami then because we started Airbnb business during COVID too, [00:08:00] and it has been really successful. Jimmy: Nice. Kathy: It's just a little guesthouse right on our property. If my house cleaner doesn't show up, I can change the sheets, I can take care of it. Not that that happens very much. There's something really scary to me about owning a rental property, a vacation rental so far away, although I'm sure there's all kinds of [chuckles] management companies there for that. Rich and I are really seriously thinking about doing it in a ski area so we can use it when we want and other people can pay for it when we're not using. How do you manage it when it's across the country like that? Bryan: Back to technology, everything to hammer is to nail type of situation, we use quite a little bit. Ultimately, it comes down to having a really good team in place of folks that you trust. The two most important components are your maid service, having a really good relationship with them and trusting them a lot. Then also having a really good-- a couple of handy people on a deck. The maids act as the eyes and ears a little bit, they do their job. We cycled through a few, so it took a little bit. It was a little bit like a relationship, we were dating for a little bit, and ultimately, it didn't work out. Then we found a really great company that we work with in Tahoe. That's been super fruitful for us and really automated a lot of the process. Beyond that, we do use some little gadgets here and there. Our biggest concern is making sure the neighbors have also a good experience because that's probably the hardest part about owning a short-term rental is, honestly, what the neighborhood takes into that and what's your impression in the community there? You really don't want to be-- you're negative area in the community, so you really want to treat those neighbors well, and that's something we really strive to do. Another part of that is noise sensors. We have noise sensors throughout the property, so we can tell if they are being a little bit loud. We can just ping them or let them know, "Hey, we did pick up that you guys might [00:10:00] get a complaint soon if you're going to keep it up. Beyond that, we have some outdoor bell cameras to make sure that trash is accounted for in the right place. Tahoe, for example, has a lot of wildlife, and you don't want any bears coming out at your trash, which is-- Being a city person, you wouldn't think that that's a major thing, but in Tahoe, they take it very seriously, and we do as well, to have everything in the bear box locked away so no bears are at your front door. [laughs] Kathy: Not just at your front door. My sister lived in Incline for many years. There was one morning she was-- turned around, there was a bear in her living room, and she jumped up on the counter and like- [crosstalk] Jimmy: Oh. Kathy: -[unintelligible 00:10:38] away. Jimmy: Live to tell the tale, right? Kathy: Yes, that's right. She also went out into the refrigerator in the garage and all the chocolates that she handmade were gone, and the lasagna, because they do like our food. [laughs] Jimmy: Oh, yes. [laughter] Kathy: That's really that's super helpful. I don't know if you know, but there was really just a horrible tragedy in Malibu where a woman-- There's very, very strict short-term rental laws in Malibu where you actually have to live there, that's why I'm allowed to do it. Let's start with the first question, is part of the research finding a place where you don't have to live there to own it? Jimmy: Correct. Kathy: Yes, okay. [laughs] Jimmy: We do that research. It's pretty simple, you can just type in "city" plus "Airbnb laws" and then you'll see a bunch of references that come up to make sure that you're following the rules because our job is not to put up illegal properties, it's to make sure that we're complying with the local rules around short-term rentals and things of that nature. Kathy: Yes. They'd passed this ordinance, at least, I believe this is what it is in LA County that you can rent something on your property but you got to be there. A woman in Malibu rented out her home for the weekend. In the summer, you can make so much money, so a lot of people [00:12:00] have done that for years, the short-term rentals over the summer, and that pays for their living in Malibu for the rest of the year- Jimmy: Oh, yes. That's right. Kathy: -because it's so expensive. She rented it out. Well, these young kids rented it, they said there was just six of them, they ended up being about 40, and the neighbors called her and said, "Hey, there's 40 people at the house, and they're on the balcony," and she was on the phone with them for hours. Well, the balcony collapsed. I don't know if you saw that. Nobody died, which is great, but young people were hurt, and now she's got lots and lots and lots of lawsuits. That's another thing that really scares me about-- At least, if it's where I live and I say on the description, "We're here, no parties," because we'll know. My daughter who's-- I won't say it was my daughter but her friends very, very regularly tell a different story to the Airbnb hosts to say they're- Jimmy: Of course. Kathy: -a Bible study group, and then it's the fraternity and then there's a hundred kids. Again, you said the sound monitoring, can they turn that off? What about cameras, can you have cameras? I know you can't probably inside but-- Jimmy: Well, the Ring, so that's another tool that we put to use. We have a Ring doorbell camera, so that's the easy way for us to monitor who comes in and who comes out, and in a way, that's not invasive because we're not trying to invade people's privacies here. Then the other thing is, on Airbnb, and I know we do the same on Vrbo as well, you can select what type of guests that you want. If somebody has zero reviews is something that we recently talked about because of 4th of July. If someone has zero reviews, you can actually screen that out in terms of guests that are allowed in your property. There are different ways that [00:14:00] we try to get around it. Then, of course, the last one is having short-term rental insurance, separate from homeowners insurance, because you need a little bit more to some of these points that you're making to make sure that you cover your bases in having an Airbnb. Kathy: You just call your insurance company and let them know you're doing short-term rentals? Jimmy: There are actually specific insurance companies, so Proper and CBIZ are two in the space. Then you don't necessarily need both. If you are solely using it as a short-term rental like we are in our case, so we just go with-- CBIZ is the company that we work with currently. Kathy: Okay. I was told that Airbnb offers a million-dollar policy, do you know much about that and if it's any good? Jimmy: We know about it. If it's good, we haven't-- Thankfully, we haven't had [crosstalk] to take advantage of that. Kathy: [laughs] Haven't tested it. Jimmy: Exactly, we haven't tested out. We just want to cover our bases too just in case there are things that Airbnb doesn't cover. Kathy: All right. Then you mentioned that there's ways to save on rehab costs by doing it yourself. I'm sure I wouldn't be qualified to do it myself, but what kind of tips do you have? Bryan: Rehab costs, yes, that can be a huge cost to the business. If you're setting up your own Airbnb, that can be almost the majority cost of getting a house ready. You have to know when to pick your battles as far as with doing the work yourself. My recommendation is to get a lot of price quotes from folks but try to be almost a general contractor in a way if you have time, especially if it's very much a transactional nature. For example, let's say you're insulating a room, you can go and try to tear apart part of the drywall and do yourself and put insulation in there to make better heating. There's also plenty of services that will charge you $1,000 to go through and drill holes and then they pump [00:16:00] this special material in there and they walk you through it, and it's very much transactional in nature, it's commodity. You can definitely find subcontractors that will do a really good job for a very affordable price, but it really depends on what it is. Some like painting, for example, it's going to be very expensive because it's just the man-hours that you can only paint so fast, and that's something that almost anyone can do. You can even have a painting party with some friends and order some pizza and you guys can all paint together if you guys are really close friends and they're maybe staying at your house for free. There's lots of fun ways to approach it. For the most part, anything in the interior that's not going to be very sophisticated like patching some drywall or potentially putting together some furniture is something you can definitely do yourself. You might want to start to look at contractors if it's getting more and more sophisticated on the inside. Kathy: Okay. Well, my goal would be to not-- [chuckles] just have it be completely hands-off. What do you think about property management companies for short-term rentals? How do you find a good one? Jimmy: The great thing is, we actually do it ourselves. One of the things that we tell everyone is that if you have the time, which honestly it's 5, 10 hours per week, so not a huge commitment, if you have the time, you can do it. If you want to completely get rid of that responsibility, then you should be prepared to give away a huge chunk of your money because, for the most part, property management companies are going to charge you anywhere from 15% to 25% of your top line. Not profits, just everything that you gross, they're taking 15% to 25%. There are a lot of good ones in the space, you can google and find a lot of options. Just make sure that you're not just paying for someone to [00:18:00] essentially help you with answering people on all these different platforms because you could do that yourself. Methodism-- [crosstalk] Kathy: That's not too hard. Jimmy: Exactly. There has to be some value add, whether that's increased bookings or consultation to help you increase your revenue with different amenities that you can add to your property. We do that ourselves, but you can easily find someone if you are looking to just completely offload that time to somebody else. Kathy: You can definitely do it yourself, and I agree with that, it's not too time-consuming, although you can get an assistant too, that would be much cheaper. I know J. Martin, I think he's got assistants in the Philippines. I'm not sure, I could be making that up. There are ways to get people to handle that for you, although, like you said, it doesn't take a lot of time. Would it make sense to maybe hire a cleaning company so that if your housekeeper's sick, they somebody else? That seems like it would make sense. Jimmy: Correct. Kathy: Yes. Then screening, I think you said something about if they don't have a profile, they don't have reviews, they don't have a photo, how do you pass on somebody? Are there fair housing laws around that? You just say, "No, [laughs] you can't rent it."? Jimmy: It's your property, right? At least for Airbnb, we do Instant Booking, but they have a feature where they have to request a book prior to being able to Instant Book. We understand we're running a business and money is money, but we want to make sure that we're responsible with the guests that we take onto our property. Bryan: Another thing, on that point real quick, is that it's a very seasonal business, so you have peak seasons and you have your slow seasons. You can be much pickier during peak seasons, and it's also when a lot of the parties tend to be and a lot of the people tend to-- cutting loose, so to speak, over the holiday weekends, so you can be much pickier [00:20:00] about who you let into the house and for how much during that time. One really effective strategy is during peak season, you have set very high pricing and you try to maximize those days the most and you be very selective about who you let in the house. During the slow season, there's going to be less issues and, a lot of times, there's also less people too. You should be much more competitive during the slow season, lower your rates a little bit, maybe have Instant Booking. You really have to play to the seasons because you will generate the majority of your income during peak seasons. Kathy: I see. What you're saying is if I want to break the rules and have a massive party, I should do it offseason. [laughter] Jimmy: Just not in our place, not in our place. Bryan: As long as it's your party, yes. Anyone else's party, no. Kathy: Okay, perfect. I'll invite you guys. Jimmy: That's right, only a Kathy party. Kathy: All right. Any last tips? I know you guys started a business. Jimmy: The tool that I recommend to everyone for pricing, you can do either Beyond Pricing or Wheelhouse. Make sure you utilize one of these tools, they only take 1% of your revenue, so it's next to nothing. Otherwise, you're leaving money on the table if you try to price yourself. I would highly, highly recommend if you get into the short-term rental space, utilize a pricing tool because you're leaving money on the table otherwise. Bryan: Yes, and the pricing tool's super effective for us because it's going to look at everyone else in the market, everyone else in the area and set a very reasonable rate. You should still double-check those. I work with a lot of machine learning engineers, and they're smart guys and girls, but they don't have the final say all the time. Definitely check the data. It's a great tool for really knowing where the market should be and how to really maximize your income. Occupancy doesn't necessarily translate to more revenue. You could have 100% occupancy, but you could be leaving money on the table in a lot of cases, and so you want to optimize for even lower. Especially, lower occupancy rate for higher revenue. Definitely, you'll want to check out some of these tools that Jimmy mentioned. Kathy: All right. Thank you [00:22:00] so much, Bryan and Jimmy, for being here on the Real Wealth Show. I love inspiring other people, showing that, "You can do this," you can do this. Jimmy: That's right. Thank you for hosting us, Kathy. Bryan: Thanks so much, bye. Kathy: Thank you for joining me here on the Real Wealth Show. If you don't know already, at realwealthshow.com, we have a list of property providers nationwide in the hottest markets in the [music] country who offer long-term rental properties with property management in place and also short-term rentals in the Florida area mostly. You can get referrals to those teams, just like thousands of our members at Real Wealth Network, and get lots and lots of information, free webinars at realwealthshow.com. Have a great rest of your day and we'll see you next time, bye-bye. Announcer: The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com

The key to buying real estate may no longer be “location, location, location.” According to one long-time real estate investor, it’s now “property management, property management, property management.” That’s just one piece of sage advice you’ll get from this interview with Myron Schroer. He’s had a real estate license since the 1970’s, has purchased real estate in several parts of the country, and is teaching his kids and grandkids about the business with a family corporation. You’ll find out how he and his wife got started, how they got the whole family involved, how they choose their markets, and where they have invested. Be sure to join RealWealth for access to the kind of information that has helped Myron become a successful real estate investor. Go to realwealthshow.com and sign up for free. It’s also free to speak with one of our investment counselors who can answer questions and put you in touch with experienced property teams across the U.S. AUDIO TRANSCRIPT: [00:00:00] [music] Speaker 1: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors resource. Kathy Fettke: The key to buying real estate may no longer be location, location, location. According to our guest today, it's more about property management and I agree. I'm Kathy Fettke and welcome to the Real Wealth Show. As I said, this is just one piece of advice that we'll get from today's interview with Myron Schroer. He's had a real estate license since the 1970s, has purchased real estate in several parts of the country, is teaching his kids and grandkids about the business with a family corporation and that is so cool. You'll find out how he and his wife got started, how they got the whole family involved, and how they choose their markets, and what they're doing today. Myron, welcome to the Real Wealth Show. Myron Schroer: Oh, thank you. It's great to be here. Kathy: I'm excited to hear about how your family has created a family legacy with real estate knowledge and wisdom passed on to the kids. That's not always easy to do. How has that worked for your family? Starting with you, was your father in real estate? Myron: Correct. We bought our first house a couple years after we had been married. We moved out here from Indiana, and I grew up on a dairy farm. My father started in real estate and like I said, we bought our first house. He was instrumental in us doing that. Over the years, we continued to purchase additional homes, as it became available. In about 1991, he started doing condo conversions. We had some apartments, and we're trying to convert them to condominiums. In 1991, that, unfortunately, went south. [00:02:00] We had a problem. Actually, the builder went bankrupt. My father was the money partner of it and he almost went bankrupt. Unfortunately, it took us about seven years to pay everybody back that was owed. At about that time, unfortunately, he passed away of a sudden heart attack. In the interim there, he had formed a corporation and put most of the real estate into that corporation. In doing so, he actually gifted part of that to myself and to my sister. After he passed away, the corporation wasn't doing well, obviously. We just paid everybody back that we had owned from the previous problem that we had had. In the course of the next couple of years, we actually was able to turn things around, sell a few things get the cash flow going in a positive direction. At that point, the corporation actually started doing well. My mom was actually the owner at that point or the major shareholder. At that point, we decided that, from an estate standpoint, it made sense to start gifting part of the corporation away. We did that to the kids and the grandkids. We started having yearly corporate meetings, which was really a blessing because it forced us all to get together. Sometimes that's not the easiest things to do. Again, we wanted to do things right from a corporate standpoint. We started having our yearly meetings. [00:04:00] People started getting more and more involved. Really over the course of the years, it's been a real blessing. Kathy: How I bet? How did those family corporate meetings go? What was [crosstalk] Myron: Well, initially, we didn't really know what we were doing. It was a lot of questions. I think most of the folks trusted my wife and I pretty much run it. In the meetings, we obviously have questions about where we're going, what are we doing, what do they invest in? Dividend is a big thing. This is a philosophy thing, but we never wanted the good corporation to give off more to the individuals or to give off enough that would change their lives. In other words, we learned a long time ago that you can't give somebody something for nothing, because it will change who they are and it's just not a good thing. We never wanted the corporation to give off a large sum, the intent was to help the kids, the grandkids, for example, playing sports is relatively expensive in school now. If the kids want to play sports, it can cost as you probably know, a pretty good chunk. We're able to help with that if the kids want to play sports, if they want to do extra things. I have six grandkids, and four of them are currently in college. It's been able to help with them. One of my grandsons is getting his [00:06:00] aerospace engineer degree, and he just became a pilot. That's extremely expensive. It's been able to not pay for all that but to help him to achieve that goal. In fact, he had his first solo here about two weeks ago. Kathy: How exciting. Myron: We're very fortunate to be able to do that. Kathy: I agree with you that when things are handed to others for free, it's maybe not appreciated, or doesn't necessarily go in the right direction. How do you keep it equitable with your kids? Is there any kind of expectation that, yes, these funds will go towards the sports or the college, as long as you hold up a certain GPA or, or you show up at a practices? Are there any requirements? Myron: We're really, really, really fortunately blessed. Our kids and grandkids, they're great kids. They understand what it means to work to achieve things. We've been very, very fortunate in that area. What we do is we give out shares and the shares give the dividends, and then it's up to the individuals to do with those as they please. One other thing that we've done, we've been able to take in and actually use a corporation as a bank, in a sense for the kids and the grandkids. If they have additional funds, they can invest in the corp, and we pay a 6% [unintelligible 00:07:41]. It's like putting in the bank only, it's the corp. It helps a corp give us money to go out and purchase additional things, but also it gives them a little bit higher return than they would get in the bank. Then we can coach them [00:08:00] on what to do with those funds eventually also. Kathy: Are any of your grandkids invested in it? Myron: They are. Kathy: With their savings? Myron: We have a couple that have shares at this point. They come to the meetings. We've tried to come up with guidelines that make sense. You have to be a certain age, in order to take and to buy in. You have to have a certain number of shares to be able to vote so that investing-- Also, we try to take advantage of the tax advantages of having a corporation and having a meeting. We pay the individuals to come to the meeting. Again, like I tell people, and I tell our accountant, we want to take advantage of every tax opportunity that is there but we don't want to take and do anything that's questionable. If the line is in the sand, we want to be a foot away from the line. The corporate meeting allows us, to take advantage of some of those, tax opportunities. Kathy: For example, the family could meet in a reunion-type setting and have that meeting and a couple of nights might be covered by the Corporation, the cost, and the food. Myron: We have not done that yet. We will. Our corp meetings, we have them local and the food and then the travel expense and the attending the meeting, those are all paid for. We've talked about the remote location and having a meeting. We haven't done that as of yet. Kathy: It seems like it would be really important for your meeting to be somewhere like Hawaii where you [00:10:00] can really relax and create. [laughs] Myron: I agree. Kathy: That might be too close to the line, but I don't know, conversations with URCPA. That is really cool. I haven't heard of that kind of scenario besides the billionaire families who do that, I don't know how far you are and your net worth, but I love that the family and the children and the grandchildren are all a part of this family corporation. That's really fascinating. Where are your properties? You live in California? Myron: We do. We're about an hour out of the San Francisco Bay Area. We actually have properties in Oregon, of course, California, Arizona. We were fortunate that about 15 years ago to go into Texas fairly large. We've got a number of homes in the Dallas Fort Worth area. We just recently went into the Florida market, and those are doing quite well as you know. Then Indianapolis really liked the Indianapolis market. In fact, we're in the process of doing some stuff in Evansville with [crosstalk] Kathy: Oh, yes. We like that area, too. Myron: That's pretty much it. We have stuff in Utah also. Kathy: What role do the kids play in the management of all these properties? Myron: At this point, not a lot. When we have a meeting, for example, we talk about using a family bank, and so a couple of the individuals were tasked with doing the research on that. What does that mean to take advantage of the corp? The intent was if someone were to maybe want to purchase a home, or if they wanted to start a business, and they needed funds for that, obviously, it's [00:12:00] a little bit difficult to get that from a bank, maybe the corp can help them out. How would we set that up to be equitable? Who would control that? Those type of things. We're looking to diversify because everything we have right now is real estate, so we're looking to diversify a little bit, and maybe it'll go some into the stock market a little bit. A couple of individuals looking into that to see what does that looks like? What's a good plan to do on that? Those are the kinds of things. We've gone through trying to set up the bylaws as far as who can be in the corp? Who can't? Things come up, people get divorced and [crosstalk] how do you handle that? If that will happen or when it happens, how do you handle it? Those are the kinds of things that we've tried to look through or work through if you will and look down the road and say, "Right now, it's not an issue, but those things are going to come up. How do we handle it? What do we do? When they do?" Those are the kinds of things that we have tried to work through and talked about. Kathy: Really incredible. There will be a lot of inheritance coming to younger people over the next decade. I wonder how many of those children are going to know what to do with what they inherit. That's why there's always opportunity for real estate investors because people inherit property, they're like, "I don't want this," and get rid of it. How brilliant to bring them in on the business years in advance where they really understand it and start to take on different positions and leadership roles within that company, so when that transition happens, it's fluid. Myron: [00:14:00] That's eventually, obviously where we'd like to get. Having the corp also allows them if, at some point in time, they want to sell their shares, they want to get out because it's not for everybody. Some people like it, some people don't. If they want to get out, they'll have that opportunity to take and do that. I believe and have always believed that real estate is just the way for the average person to create long-term wealth. If you stay with it, and if you don't get undercapitalized, that's another key. Don't get undercapitalized long-term, you're going to do fine on the tax advantages, and stuff in real estate is just that-- I don't know of anything else that is close to it. Kathy: You've been in real estate for how many years now? Myron: Actually selling real estate and I got real estate license in 1973. I did it part-time most of my life. I guess it's been, do the math, 50 years. Kathy: That's why we wanted you on the show to give us your sage advice that starting young is worth it because we're going to be living longer and longer, and a 30-year fixed-rate loan seems like so far away in the future, and it's not that far away. Over the years, I know back in the '70s, there were people saying that real estate was expensive in those dollars. From that perspective, it wasn't really that much easier than it is today. What do you think? Myron: We bought our first house and I had alluded to [00:16:00] that earlier. I wrote to work with four other people and we would talk about real estate. I had it, but the first listing that I got was actually worked out to be a really good rental. I said, "I'd love to buy that house," but we just didn't have the money. We'd only have been married a couple of years, we didn't have any money. One of the guys I wrote this, "I'd really liked to buy a house too, but I don't have a lot of money either." We bought the house together, we still own that house, that same amount today. Now, before you say, "Hey, it's already depreciated and you're a fool for still having it." From an investment standpoint, you're absolutely right, but that house, it's symbolized for us what real estate investing is? It's at this point, obviously a cash cow. Is it hurting us tax-wise? Of course, it is. In fact, we're probably going to take and sell it here before long on 1031. You're right, it was tough to get started then, it's tough to get started now. I would just encourage everyone to do what they can do to get into real estate. I know that can be difficult, but again, long term, it's going to pay off, it just is. Kathy: There is a belief even back in the '70s that how could prices go much higher. My dad bought a home, a primary residence in Atherton for $99,000, and he was a dentist. It was hard, it was a big purchase. $99,000, those homes are 10 million now today. You couldn't fathom that a $99,000 house, it was already expensive, could [00:18:00] ever be worth a million, or 2 million, or 10 million? It's not in our ability to understand that. Yet, it happens every decade, right? What did you pay for that house and what do you think it's worth today? Myron: We paid $21,500, we'll probably sell it for $700. Let's wait, it'll probably go over 700. Kathy: Back then, you couldn't fathom that much money. Myron: No, it was no. You asked about the prices and getting into real estate and one of the things that I'm sure your viewers are probably thinking, "Prices are high right now. Should I invest now or should I wait?" I tell people, "It really doesn't matter." Don't stop watching this podcast because I said that. If you step back and look at it, you need to get in the game. It doesn't matter when you get in as long as you can afford it. For example, right now, you buy a house for $500,000. Interest rates are extremely low. If that house, let's say a year from now, or two years from now, it's 20% less, and it goes down to 400,000, people say, "Hey, I should have waited." Chances are a year from now or two years from now when that house is $400,000, interest rates are not going to be at three and a half, or three and a quarter. They're going to be up at four and a half and five. Run the numbers, what you'll find out is your payment will be higher than if you bought the home today. Long term, it doesn't matter when you get in but the key is to get in, and once you get in then it's a little bit different story, but the key is to get started. Purchase your first property, learn the ins and outs. Kathy: Especially today [00:20:00] when we have the kind of inflation that we have, and what was it just at 6%. If you're sitting in cash, you lost 6% of your money by doing nothing with it, whereas with real estate it usually increases with inflation while you're sitting with the same debt position. Myron: Another concern that I found with folks is, "Well, I'm afraid if I buy that $500,000 house, I could lose everything." Well, that's not really true. As long as you're not undercapitalized to begin with, as long as you can afford it, if you can stay in at long term, you're not going to lose because of-- In real estate, worst case scenario if it goes down to $400,000, you'd lose a 100,000. That's a lot of money but if you're in the stock market, the stock market can lose 50% in a matter of a week or two weeks. In theory, you could lose-- If the company goes bankrupt, you could lose everything. Your chance of losing everything in real estate, again as long as you're not undercapitalized-- It's not zero because I guess in the theory it could go to zero but land or real estate it's not going to go to zero [unintelligible 00:21:17]. Kathy: Typically it's worth something. Myron: Absolutely. Kathy: You only lose money if you sell. If you're able to use the property for other things like renting it out, then it doesn't matter because you haven't sold it. Myron: Exactly. Again like I said initially, long-term real estate it is a way for the average person to create long-term wealth. I can give you another real quick story. My son here 15 years ago, we were able to purchase the duplex in Texas and where we get in with nothing down on the whole thing. We financed the whole deal. He put all the money back into it with the intent of [00:22:00] using it to finance his daughter's college education. Well, it was paid off here quite some time ago and as it turned out he didn't need to use it for the college education. Those are the kind of things that people don't really understand or nobody really tells them. If you're a young person, you have kids and you want them to go to college, it's tough to save for that, but you can take them. Buy a piece of property. Yes, it does take a little bit but there's ways to do it. Hang on to that property, put the money back into it that you're making on it, and then 10-15 years now when your children get ready to go to college, you've got the funds available to do that. Those are the kind of things I like to talk to people about and encourage them, and help them to help set them up to be able to do that. Kathy: It can be done tax-deferred, so all the equity gain, there's-- All you have to do is look at the charts and look at history to see that prices are going up. Chances are it will be worth more in 15 years, in which case you just refinance at that time take the cash out and you're not taxed on it. Until you sell-- Of course, the tax situation can always change but that's how it is currently, and has been for a long time. What else do we need to know with your years of experience? What are some of the most important lessons that you learned? Myron: I learned that if you ask an individual what the three most important things about real estate are, they'll say location, location, location. I tell people, "Take that, write it down on a piece of paper, wad it up and throw it away if you're investing in real estate." The reason being that most of the real estate that you invest in is not going to be local. You're going to have to hire a property manager. The three most important things in real estate [00:24:00] if you're an investor is a property manager, property manager, property manager. You can take a good house and a good location and a bad property manager, and you'll lose your shots. You can take a bad house in a bad location with a good property manager, and you'll still make money. That's a lesson that we learned the hard way, but I would just tell folks, "Boy, it's so important to have a good property manager." That's-- Kathy: Well, have you seen a difference because I sure have. In the '70s I wasn't investing then but I don't imagine there weren't computers. It was a very different world, you were probably just investing locally. Then even when I started 20 years ago, it was not very organized but it's come a long way. What have you noticed over the years? Myron: Well, like you say in the '70s it was a totally, totally different ball game. It was really the individual, that was the key. Finding an individual who was a jack-of-all-trades, who was very organized, who communicated well in-- What was I saying? Was a jack of all trades, definitely. That was key, and we didn't have-- At least I wasn't aware of the management companies that had two, three, four, 100 doors. They were smaller mom-and-pop type deals. Now the mom and pop guys, they're not there anymore. It's a 2, 3, 4, 100, 500-door companies. You're right. It's the computer, it's the organization. Communication to me is key. It's just critical to have someone that you can contact or that can contact you. Who does contact you [00:26:00] on a regular basis, maybe that stems from the fact that old school I like the contact, I like to find out what's going on? Computers have made things a lot different. Going in video, the video tours, that's a big change and it's helped a lot. Kathy: absolutely. For our young listeners, for our millennials, and maybe gen X and gen Z, tell me what the world was like in the-- I don't know if you were selling real estate in the 70s but you were buying it. There wasn't internet, there weren't cell phones, no one had a car phone. How did you buy real estate? Myron: if I would get a client, I would have to go out. Actually every Friday the multiple listing service would send out a book and it was a book with all the listings in it printed. Well, it was obviously outdated before we ever got it, but you would go out. If I would have a client looking for a house in a specific area, I would go out two or three days before just searching going through, looking at the different houses in order to be able to show them. It was quite different. You built up your clientele, so if you knew that a house was coming on the market and it was something that you wanted to be able to purchase, you had an end prior to the house coming on the market. That's changed a little bit. Obviously with the computer and MLS and with the millennials now, really they do most of the searching that from a real estate standpoint, [00:28:00] and I still deal in real estate, a client will call me up and say, "Hey, I saw this. It just came on five minutes ago and--" Kathy: "Can you help me?" It's a lot different. What a world? Oh, my gosh. I will say as much as people complain about the technology age, it's a lot easier than back in those days when even just trying to find the property, you had to use a map, you had to go to the grocery store and figure out how to get a physical map and try to find your way to the property. Boy, those were tough times. Realtors really earned their money then, really earned their money back. It was hard. Myron: You take Thomas Brothers Maps to people right now, they probably don't know what it is. Kathy: They don't know what it is. Myron: It was a nickel back then. Kathy: You got your client in the car and you're trying to shuffle through these maps to find the property? Myron: Yes. Kathy: Oh, my goodness. It's really been a pleasure to have you here. I'm curious, how did you find Real Wealth and with all your experience and knowledge? What do you gain from an investment company, an educational company when you already know so much? Myron: Well, this is a weird deal. What we used to do, I learned a long time ago enough to try and reinvent the wheel. What I mean by that is we would take and invest in different areas, but it was through contacts of other people, other realtors, other investors that they had grown to know over the years. They had already gone to a certain area in Oregon for example. We were there only because of a friend that I had that had already been there and then vetted out several property managers. He was doing quite well, so we followed and went there. As far as getting into real-- Well, one more quick story. What we used to do is-- and you're going to laugh at this one, but we would go into a market. For example, after the hurricane down south, we went into Biloxi, Mississippi because of the opportunity. We wanted to find out what was going, had no contacts, went down, and spent a week. We always spend time in Walmart, talking to people and I know that sounds crazy. If you want to find out what's going on in an area, go to the Walmart, and people will talk. They'll tell you what's going on. Kathy: Just walk down the neighborhood and talk to people who are walking their dogs or go to the closest coffee shop, they will talk. Absolutely. Myron: You will learn what the employment situation is. More than that, you'll learn what the attitude of the people is. Different parts of the country, people's mentality, it's just different. The way they look at things, the way they look at personal responsibility, it's different. You'll feel that, you'll learn that real quick. With Real Wealth, we don't do that anymore, because you guys have pretty much gone in and really looked at the areas, you've already bedded the property managers, the realtors that you're involved with. That's pretty much done. It's made it so much easier if you will especially for the person that doesn't really have any experience. You probably don't remember this but back in 2007, I actually wound up calling and talking to you about trying to save individuals' homes, who were upside down during that period. You actually referred me to some folks up in Sacramento, to try to get some funds to purchase loans from banks. [00:32:00] That's how I first found out about you and Real Wealth, and you were extremely, extremely helpful. We weren't able to put anything together to do that but anyway, that's how I got into to hear about Real Wealth. Then we did do some things, at least 2007, 2008, 2009 for a while. Then, we've been utilizing you guys. We've been, I think very, very fortunate to have found you. I love the seminars that you do, the education that Real Wealth provides. It's great having the vendors come in and talking. I love the deal where they come in, and you go to lunch with them, and you can have all your questions answered. I think that's a great thing to do. Hopefully, now that COVID is lifting, you guys would be able to just start doing those again. That's the deal. Kathy: Oh, that's great. Wow. Well, we are really excited to get our next live event scheduled. We hope to do that soon. For any new listeners, who might be surprised the membership is free, and the information and education is free because early on, there was not a lot of information for new people and you had to pay a lot of money for it. You go to these real estate groups, and they'd have some slickster on the stage, get you all excited, run to the back of the room, and pay thousands and thousands of dollars to get the knowledge. That just upset me at the time and we made a commitment to not do that. Not that there's not good education out there that deserves to be paid for but that's just been our commitment to make it free. If you're new to the network, there's nothing to lose. You just [00:34:00] join. You get access to hundreds of webinars. I'm so glad you've been a member for so long and maybe we can get you to be an educator too. Myron: I'd love to help. One of the things you learn too is in this whole thing, and I know you guys I just saw recently you're doing a webinar on the giving back. That's the other thing that that's so important. As we are blessed, we're really-- I would just encourage everyone to make part of giving back part of their life also because it's just so important. That doesn't necessarily mean financially because sometimes when you're first starting out, you think that's pretty tough to do. You can give your time and help others also. I think what you're doing as far as giving back is a huge plus also. Kathy: Thank you so much. Myron: I can also say that every one of the individuals that we've dealt with in the different cities, the representatives that you have there, they've all been extremely helpful. In this business sometimes you get individuals that do apply or maybe they don't mean to apply pressure, but they do. That's another thing that I think of a plus for the whole Real Wealth network. There doesn't appear to be any pressure. Real Wealth is not there, too-- Obviously, you're making money but the important thing is not the money. It's not about the money. That's another way of putting it and I appreciate that. Kathy: Oh, thank you. We've always figured that if we can educate and present-- Well, first and foremost, educate and then [00:36:00] present opportunities, the investors will know if it's a good one or not. If it's a good one, they'll flock to it and if it's not, then that's our bad. We didn't do a good job. There's absolutely no pressure. That's a comfortable situation, too because I've been pressured into so many things, lots of pressure these days. We're adults, we should be able to make up our own decisions, make up our own minds. Well, we are out of time. It has been so great to have you here. I do mean that we should have you as one of our educators on this topic of how to create a family corporation. I just love that. Beautiful. Thank you so much, and have a wonderful rest of your day. Myron: You as well. Thanks. Bye-bye. Kathy: Thank you for joining me here on the Real Wealth Show. If you'd like to find out some of the things that really helped Myron be so successful and his children and grandchildren, go check out realwealthshow.com where you'll get access to hundreds of free webinars. It's free to join free webinars, all on things like asset protection and how to improve your credit and how to get the best insurance for your properties and what to look for in a property management company, what to look for in different markets. Then you also get a referral to teams across the country who help our investors find the properties, get them under good management, and help oversee that process to make it a little less intimidating when you're investing out of state. They wouldn't be on our referral list if they didn't come with rave reviews from our members. If they don't get those rave reviews they're not on the list. Again, you can check that out at realwealthshow.com. I'm Kathy Fettke. We'll see you next time. Bye-bye. Speaker 1: The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy [00:38:00] or sell any securities or to make or consider any investment or course of action. For more information go to realwealthshow.com [00:38:10] [END OF AUDIO]