7 Things EVERYONE Should Know BEFORE BUYING a House! (I Wish I Knew This Earlier!) | Episode 98

My life as a first time home buyer educator means that my days are filled with answering the same question over and over and over again. Answering questions from people all over North America. And right now there's one question that's dominating my inbox and that's pretty much because the 2022 economy is slowly turning into a poop parade of madness. Everyone's asking, should we jump in now and buy or should we ride it out and wait to see how things happen happen later on. This is the most important question what you ever heard. Let's get into the answer to that burning question with no sales pitch, no hype, no bs, just real advice. And we're going to be using the biggest screw up of my life as a guide of what not to do. Every week we're putting out new information on the housing market. So hit the like, hit the subscribe, ring those notification bells for all the notifications and you'll be staying up to date with what's happening in housing. What is up my how to Buy a Homies I know you're thinking you saw the length of this video or this podcast, you figured out I've got a lot to say about whatever it is we're going to talk about. Well, it's true, I do. And it's for good reason. This episode is gonna be one of those episodes for the ages. So hang on to it, save it, mark it, because people are gonna be referring back to this one again and again and again. Because as the market shifts, people are gonna try to wanna find out what's going on and what's the right game plan for new market conditions. So today I'm gonna answer the question, what's good homies? Normally when I say that it's good, but today what I'm talking about is I'm actually gonna answer yes. What? What is good? That's the big question. Is it a good time to buy a home? If I had a dollar for every time that someone sent me that question, well then I would buy your first house myself because I'd have a lot of dollars. But as always, the answer to the question is it a good time to buy a home? It depends. But in a general sense, it still is a good time to buy a home. But it's not a great time. You missed that time. There's nothing we can do about that. And as soon as you accept that, as soon as you actually understand that it's still a good time to buy a home, well then you're going to start to wr brain around the fact that, wait a minute, what's next? Yeah, it's a good time, but soon it might just turn into an okay time to buy a home. And after that it's going to be a flat market and then the market's going to be going down, and the market's going to go down and you're going to start freaking out. And then all of a sudden, the market's going down for a few years and then you're back to thinking that, well, now it's a great time to buy a home. See how this works. And it's not just my listeners thinking this. In a recent survey, Americans were asked if it was a good time to buy a house. At a record low, only 19% thought that it was a good time to buy a home. Now that makes perfect sense. With a recent spike in mortgage rates and home prices going on a tear. For the last all the last year we went up 19% and then it continued into 2022. So we're up to 22, 23, 24%. It's insane. And of course, all of those numbers follow the slow and steady climb up without a decrease for over a decade. So it's very clear that people have been intaking the recent data about the high mortgage interest rates and the price affordability, and it's changed people's minds. Some people are thinking that maybe buying a home right now isn't prudent. After all, we've been taught always what to buy low and sell high. So before I get into the story of my individual renting that happened in my 20s when I could have purchased a home and how you can use that as an example for yourself, it's time to reset the goal the podcast. And so many of you are asking me about the timing of the market. You're trying to time time the market with this purchase of your home. Well, unfortunately, this is when you're ready to buy a home. And that timing doesn't have anything to do with how old you are. The podcast is called how to Buy a Home. But I'm concerned that many of you right now are spending too much time asking the question, when can I buy a home or should I buy a home? So as far as this podcast goes, if you listen to the early episodes, especially episode five, known on the streets as the Sidoni Manifesto against the Real estate industry, well, then you know the main goal of the podcast is to help crush the confusion, make the whole process less intimidating, and help you find quality service with your best interest in mind. Not your freaking realtors. So if you're a homie, first of all, thanks. And second of all, share this podcast with the others. You could do it via text right now from your phone, hit the three dots in the box with the arrow. And thirdly, and most importantly, is understanding the philosophy of my message. My message is this. In North America, United States and Canada, where I sell property and where I do all my research. Where when you do the math, as a young, or maybe even a not so young adult, if you are renting, the math shows that owning can be far more beneficial for you. No matter what the market is doing, if you keep that property for seven to 10 years, the math is going to work in your favor, period. That's the message of the how to Buy a Home podcast. And the reason is because that statistic is true. Since the Revolutionary War, we're talking through World wars, the Industrial Revolution, dozens of recessions, and the Biggie, the Great Depression. So if you're renting, I don't say it a lot because I want you to understand what's going on with the market. But the best time to buy a home was yesterday, and that's in every economy now. Does that mean that you can buy a home today? Well, no, not everyone. So that's why the podcast is here to help you and everyone who rents work a plan so that you will be able to get everything in order and you can buy a home as soon as possible. And then the yesterdays that are happening every single day will happen even sooner for you. But bearing in mind that a lot of times those yesterdays are going to happen in a recession, a correction, or even a crash. I've seen first time home buyers try to time the market for 16 years now, 13 years of that was me doing it on my own here in Southern California, where it's so expensive that many people think that that is their only way to come out ahead is to try to time the market. And for the last three years, I've seen thousands of people all over the country, all my homies and podcast listeners, trying to do the same thing. They're looking at price increases and interest rates changing and they're using that as the main factor as to when they buy their first home. Look, I love all of you, but this is just not prudent. If you're renting at the average price in your town, then the best time to buy the average first timer entry level home in your town was yesterday. That was true in 2005, that was true in 2012, 2015, and with a right plan, that's even going to be true in 2023, 2024 and 25. For the past three years, I've been speaking so much about taking advantage of the prices going up, combined with the low interest rates that we had in the time that I believe that this overall philosophy, this overall message has gotten a bit lost. I will always, always drop the market knowledge on you. I will spit those facts and I will help you take advantage of whatever the current situation is. That's what I've been doing since 2019. On the podcast, I saw a chance to enlighten those of you who didn't think that you could buy, and I saw a chance to enlighten those of you who didn't that you should buy. I helped you understand that you totally should, because you're going to make mad profits quick. Instant equity. Well, I'd love to keep spitting that fact out to you, but the game is changing. Maybe not today, but sooner than we think. Here's what's happening. Many economists are warning of a coming recession with the familiar precursors already here. What are those precursors? Well, you've got the inverted yield curve. Now that's a nerd stuff that I explained in another episode. You got the Fed raising the Fed interest rate. Inflation's at 8.5% and the GDP growth declined sharply from fourth quarter 2021, where it was at 6.9%, down to a shocking 1.5% in the first quarter of 2022. Now, if it declines two in a row, that's what all the economic nerds are going to say. Two quarters in a row of GDP decline. That's a recession. But hey, the good news is this may not affect your housing too badly, as housing has gone up slightly in the majority of the past five recessions. Also, housing forecasts still show that we are going to go up in prices more than double the annual average price increase for the rest of this year. The rest of 2022. Seven economic agencies average a prediction of 9% increase for home prices in 2022, and then they continued to 4 to 5% for 23 and 24. The better news is that the philosophy of this podcast. I hesitate to say this, but I don't give a darn. I'm going to say it. It's market proof. It's market proof if you follow all the plans and you don't make the mistakes that I did when I was in my 20s. If you listen to all the episodes where I go full Ted Lasso and I get into the Believe mindset about making the numbers work for you. Rent versus Buy Buy crushes rent in that cage. Match time. Now, sometimes it's a knockout punch, a big flying knee, or one of those ones where they jump off the cage and kick him in the face and he's down fast. Now that's what happened in, well, all the way from 2012 up to 2020. When I started the podcast in 2019, buy was smashing rent. But if you go back even further than that, that's a long freaking time from 2012 all the way through 2019, 2020 and 2021. That's a long time to be such a heavy favorite in the fight. But with the potential changes coming to what's happening, time to switch this fight strategy because you're gonna need that to win the new battle. And it might be coming a little sooner than we had hoped. So in the big picture, the no bs, no fear mongering analysis, sure, we accept it. You missed the great time to buy. And though we are seeing the signs of the slowdown, we likely won't go from a great market to an awful market overnight. That's a crash. This is not going to be a crash or a bubble burst. It's not likely to happen. If you disagree with that, I totally respect your opinion, even though I disagree with you. But I respect that you have that. Because realtors and lenders, well frankly, they suck at bringing you the clear information to help you make an informed decision. And all this misinformation or lack of any decent information, that's all you have to go on. So of course you're going to think that. That's why this episode is not going to be 11 minutes long. And that's why it's not going to be a 30 second social media post telling you the top three ways to buy a home in 2022. Dude, this is a big deal and you need to put some time in to make sure you're doing this right. And for all the bubble believers who I respectfully disagree with, I hope you take some time to check out my research and see what you think. I warned about a recession coming, but it wasn't in the last episode. It was in 2019. I told you back then, you know, there might recession coming. But hey, if you're still renting with the low interest rates that are happening right now, replacing your rent with a home purchase is actually the best thing that you can do to shield and protect yourself against inflation. Those who heeded that Warning and took the advice from the 2019 podcast that I was doing in my kitchen with crappy audio. Well, they're now paying a fixed monthly payment. The rent hasn't been raised in three years and they have thousands, if not hundreds of thousands in equity to protect themselves for whatever economic onslaught is coming. And then if you go back To August of 2021, when the Google search for quote, is this a housing bubble, unquote, it had gone up over 2000%. So I realized, oh my God, you guys actually give a damn about this. And in that podcast, I gave you an hour of data and metrics and historical analysis. Now the people listen to that podcast and bought. Then In August of 2021, they would be up 12 to 15% with once again a payment that is fixed for the next 30 years and no more rising rent. And then if you want more bubble information, fine, go Back to episodes 50, 60, 62, 67, 68, 70, 72, 73, 74, 75, 78, 84, 89, 92, 93. All personnel, please exit immediately. Yeah, there's a ton there. If you want more details on waiting versus buying and the great bubble debate that kicked up. Well, it started in 2016 and 17 and the people just kept saying it every year, hoping that eventually, someday they'll be right. But again, if you're a first time buyer out there and you're listening to those people and you're believing it, I respect the fact that you think there's a bubble because you're not getting enough information from my sorry excuse of a so called industry. But barring another global meltdown, I have to disagree. Not because I'm smarter than you. In fact, it's because I'm kind of pathetic and I spend hours and hours and hours researching all of this information that I then put into all the podcasts and gathering the data to put out those episodes and then watching these factors daily. Yeah, I don't scroll through my TikTok looking at fun stuff. I read real estate nerd crap. So I have come to this conclusion based on that and I'm sharing it with you. So now add all of that to the potential recession data that I mentioned at the top of the episode and be ready and just accept this is where we are. You missed the great time, but you weren't ready then. So now prepare to get ready. Currently, we're still in a good market despite all the bubble trolls on the Internet. Here's why it's still good. Not great, but still good. As of right now, first of all, demand is still happening. It's just slowed down from hyper crazy insane to just insane. But as far as housing goes, it's still insane demand in the grand scheme of things, which means we're not going to crash anytime soon. The second factor is that the inventory is still stupid low. I mean, stupid low. But we are starting to see it slowly growing. Remember the beginning of this year, we were 700% lower in the number of homes for sale before the last crash. And now we're in like the 600% lower range, still way off of a number that would cause a crash. And the last one, get ready to punch me in the face when I tell you this. Mortgage interest rates are still low. Even at 5%, they're still relatively low in comparison to years and years and years of data. Okay, so let's focus on the mindset, except the fact that glorious short term gains those days are over. We've now moved into the long term game. And you can't say I didn't warn you because, well, podcasts, it's time to see your home not as a short, quick way to make some fast money, but as a safe and stable long term asset with math that beats the fear induced thoughts about waiting it out and somehow that's going to be financially better for you. You missed great. And you aren't buying at the bottom. If you buy this year or next year, the year after that, you're going to be buying either at the top or near the top. And then you're going to be looking to ride out the coming corrections. But you can do it with a locked in low fixed payment that will seem ridiculously low in 10, 15, 20 years no matter what the interest rate is. And that's going to help build you and your family's wealth, or your plants, whatever. And if you're not ready right now, maybe you're listening to this and you're thinking, well dude, I want to get in before good. I don't have a down payment. I still need some time. Well, what happens if good goes to okay now? Maybe okay is going towards a recession and that's when I finally save up my money. We'll do another podcast at this time. But this is the reason why this podcast is the one I'm telling you to save and go back to forever timing the market up, down, good, bad, it is irrelevant. When you realize the unpredictability of what's coming next, you just get your believe on. You need to believe that buy is going to pummel rent in that cage match, no matter the market. And don't stress on having to come up with a whole new strategy every time you hear a little blip or a change in interest rates or prices. I've been saying the recession's been coming since 2019, so guess what? I've got a plan. It's time to reset your brain and get real. Number one, accept the things you can't change. You didn't decide to do this in 2012. If you did, you'd have a buttload of money. You didn't decide to do this in 2018, 19, 2021, so you missed some fatty appreciation. So accept it. But now we have to take advantage of what's left for you. And make no mistake, regardless of the market, if you're renting, the best time to buy was yesterday. I know this statement is going to hit some of you guys the wrong way. I see haters on social media all the time. Anytime I post something and they're always posting, Realtors always say you should buy because want a sale. Well, here's one realtor me. I'll tell you, I agree with that.

Troll and their stupid dumb voice.

Some realtors do say that because they want a sale. Some, in fact lots of realtors suck at their job and are desperate and they'll lie to you and they'll tell you it's good to buy or it's good to sell anytime. And then the worst problem, even beyond that, is that most of the ones with the good intentions, they're going to tell you if you're renting, it's always a good time to buy a house, but they're not going to communicate the why behind it. So of course they sound disingenuous. Disingenuous is a fancy word for full of crap. So for anyone renting out there in podcast or YouTube land, there's a bigger picture to consider. So let me clear up my intention behind this. Yes, I believe in my philosophy that all renters should explore buying and stop renting as soon as they can, no matter the market. Why do I think that I don't care? Well, it's not because I'm trying to sales pitch you, but it's because I strained my hamstrings multiple times kicking myself in the butt for missing out when I was in my 20s and renting instead of buying. I freaking blew it. Big time. And then I learned how bad I blew it when I got into real estate and I made it my mission to start a revolution so nobody out there gets lulled into doing nothing and ends up making the huge mistake I did. You're either gonna be freaked out because you've got fear of the process or worse, what is happening right now. That means you're gonna be reacting to what happens right in front of you. People putting on the brakes because the haters are saying the good times are.

Over, so don't do it.

Side note on that, I love how every time that people claim that buying a home right now is stupid, they hardly ever ever explain any of the math or the facts behind why they've come to that decision. They just say people are cheap and following the trend or they say it's going to crash, so don't be an idiot. Just buy when it's low. Stupid. And then of course, they do that with no figures to back it up. End of side note. So let's get into my story to help you sift through the negative headlines, the trolls, the fear mongers, the impatient and negative and cynical people that are coming out of the woodwork all of a sudden to warn you of this impending doom. To see how this might work, let's take my personal history of my twenties to see how ignorant and dumb I was. Sounds like fun, doesn't it? In 1991, I was turning 21 years old and I didn't have a clue. I didn't even think buying was an option for me in any capacity. Not even close. I mean, I wasn't even really like afraid of the process because I didn't even think it was possible. To say buying a home wasn't on my radar would imply that I even had a radar for anything like that. The thought wasn't even in my universe, nowhere near my brain matter. So I remained blissfully ignorant, uninformed. And besides, I wanted the freedom to.

Live my life, man.

Woohoo. So I rented. Looking back on it with what I know now, I blew it. Only now, as an old dad and a dude, do I realize I missed the real freedom to live my life. Oh, I said old drink. Everybody thinks that you're going to lose your freedom. You can't live your life. Well, I could have made hundreds of thousands of dollars with so, so little effort by doing just the bare minimum. I mean, exactly what I did. Paying my monthly housing bill, which I did every single month, I just paid it to the wrong person. It would not have cramped my lifestyle. In fact, the condo I would have purchased would have been actually a lot sweeter than most of the many, many apartments that I lived in. And like I said many, many apartments. It also me from having to move every other year and I would never have to worry about rent increases. And let me say it again, it would have been no different in my pocketbook. I still would have been free to live my life and go wherever my whims desired. Still could have had freedom, but with the huge added bonus of more financial freedom in my 30s. But instead I kept busting my butt in my 30s because the only return I got from those years in Hollywood when I was paying all my money to the landlords was a 1500 dollars security deposit I got back instead of a cash flowing asset that could have provided huge returns to me in my 30s and beyond if I wanted to so that I could be experiencing real financial freedom in my 30s and 40s. So 28 years later, I started a podcast out of sheer madness over the hundreds of thousands of dollars that I lost by not buying a condo in 1991 when I was a perfect candidate to buy a home at the the very young age of just 21. So this story is one of the two big reasons I started the podcast. Like I said, blah blah blah. Over a decade in the business, I saw how savagely like bad savagely, not the good savage. You know, I saw how wretchedly savage the real estate industry treated first time homebuyers. So I decided to start a people's revolution, like an underground paper trying to rally all the masses to overthrow a dictator. But then number two, what we're getting into today, the big reason why I started this is because it was my story from all my years of watching all those time travel movies. I learned that when you do get a chance to go back in time, you're probably going to have a very limited window to communicate with your younger self. So I wanted to make sure that older me could explain the big mistake I was making a younger me, so I would avoid the screw up. So my plan was make a podcast and I could simply leave younger me copies of the podcast to help make sure that they make the right move in life. Since I'm pretty sure that it's going to be a tight window when I do run into them and there's like time, space and everything coming around. So I'm probably not going to have much more time than me just to be able to look at them, hand the podcast and say no time to explain and then I'm gone. Now I understand it's going to be confusing that they I'm handing them a podcast, but you know, I'm probably going to transfer it into like a cassette tape or whatever I was using back in 91. So here is the sad story from my past that I'm happy to bring to you as a learning tool for all of us here in the present. I could have purchased a set of renting in my 20s. And here's the kicker. The market wasn't heading up. I don't mean slowing down. I mean it was flat in my 20s. It started to go down immediately after my 21st birthday, the same month that I put a $3,000 security deposit down for my Hollywood apartment. Now, if I had Doc Brown to take me back and given 20 year old me the podcast and I'd realized the market was going to drop like right when I moved up to Hollywood, sure, maybe I would stay at home for another year or so and save my money up and then I would have purchased the condo for $150,000. But let's say I didn't have him. You know, let's say I just went ahead and instead of putting three grand down for an apartment on my 21st birthday, that I ended up buying a condo for $150,000. Well, the first thing you're going to say to me is, dude, you were just turning 21.

How could you commit to live there forever? I mean, what happens if, you know, that job ended and you got a job someplace else?

This statement has cost more first time home buyers a lifetime of financial freedom and security than I can fathom. Now, I want to be clear. I am not an investment podcast. I do believe in real estate investing, but I also believe that this podcast mission is to help the underserved. And that's you guys, the regular old first time home buyer. You know, after I interviewed that 19 year old kid from TikTok Courtland, there's even an extra layer on that for many of you. Why even rent at all? Now for most of you, the answer is I'm waiting for the market to go down and I'm thinking that that's the smart play. Well, here's my story about not buying in a bad market, not a good market or an okay market like we're in right now, but I'm talking about a bad market. If I had purchased on my 21st birthday, the market was going down like immediately after that. It barely got back to break even in this scenario when I would have moved out in 1998. So that means I would have bought, the market would have gone down, stayed down, and then come back up right in these Eight years that I'm about to talk that time. Over those eight years, I averaged 1250amonth in rent. I had a roommate some of those times. So I factored that in and I calculated it all up. I paid $104,000 in rent. Now, this is $1991. That's a lot more today. Now, how would that $104,000 in rent compare to if I had purchased? Well, I did the math on that. It would have been about $125,000 in mortgage payments on $150,000 condo. Now, those payments would have reduced the principal, taking it down to $110,000 in remaining mortgage. Now, remember how I said the home went down and went back up? Well, Now I'd spent 125,000, which, yes, it's more than $104,000. But the home that I bought, even though it was the same price as when I purchased it, and that was break even, I would have gotten back my down payment of $30,000 plus another $10,000 because I'd paid it down to $110,000. So even though I broke even, even, I actually made $10,000. So now you subtract that from the $125,000 that I spent and that takes me down to $115,000. So now the difference is I could have owned something that was the same price for $115,000, or I could have rented for $104,000 and got nothing. Now, to the uninformed, that looks like, well, I paid a little more and I got something that doesn't actually get me anything. But that's just the beginning of how this all works. That's the simpleton math, though. My 12 year old says I'm not supposed to call someone a SIMP anymore because it means that you're too thirsty for someone. In my day, we just called a SIMP a tool. But again, I digress. Now, did I mention that this break even asset, that the interest rate on this was 9.59%, 9.59% mortgage interest rate. So that would have cost me $1,311 a month in PITI. That's why it's a little different than my average of 1250amonth. Okay, another side note here. Some people hear this and they say.

Okay, Boomer, it was easy to buy with 20% down when the home was so cheap and your payment was so little. Your generation screwed us and it's impossible now, so shut up with your. Back in the day, we made do story.

Okay, first of all, I'm not a boomer. I'm Gen X. Secondly, I empathize with you. I really do. This is why I started the podcast, because you're correct. I'm not going to go back and tell you stories and and tell you to put on your grown up panties and start acting like adults like we did. Are you listening to this story? I'm not that guy. I was prancing around living YOLO from apartment to apartment. And that was before YOLO and FOMO and all that was cool. Oh, and you know what else I didn't mention to you? In 1996, I bailed on my apartment, got a subletter for four months because I wanted to go and live in Atlanta, and I worked for Coke during the Olympics in 1996. I get it. I'm with you. I know that today is different. I'm not telling you to suck it up like we did in the old days. That's why I'm here to help you beat today's game. My message isn't, you know, stop being so entitled, Stop whining. My message is, damn, it's getting near impossible. And I see why you're freaked out, but damn near impossible is not impossible. You can do this. I just have the cheat code for you. That's me. So let's join the revolution. Let's go. While the memes are yelling at the boomers who had it easy. I get it. Like I said, the sentiment is correct. But in many ways it is different for you. And it's harder. But mathematically, it's not nearly as bad as all those snarky memes blaming all the old people for ruining it for them. It's not even close. Okay, fine. Well, at the time of the example I'm giving you, the average rent for a two bedroom was $750. I was paying $12.50 because I was young and dumb and I thought I was all that. So I got a little more expensive one. I was all bougie until a little bit later when I realized that I needed a roommate to be that bougie. So. So let's take $750 and compare that to the average rent for a two bedroom in a major metropolitan area today. That's $2,000. That's a 267% increase in monthly payment. Okay, so the rent's different. So then let's multiply the $150,000 cost of the condo. You know, the one that you're going.

Yeah, you can Never get one for that now.

Okay, great, great. Well, let's see how that works. To Today's rents. A 267% increase on that $150,000 condo, and you get $400,500, almost exactly the same as the current median sales price for homes in this inflated market. So you see, I'm not a boomer telling you to get over yourself and stop whining. You're right. The numbers are bigger than they were back then. And the initial investment, that takes more time if you're going to go by The I need 20% down rule. But in general, the numbers are pretty much the same, so stop with all your stupid memes. That's why I started the podcast, to help you see the real math and help you beat the system. The math is there, especially if you're using the national average for the major metropolitan areas. The whole thing is not much different than the boomer actually had it. When you extrapolate the rent to prices ratios where it is rigged against you. That's what I just told you in one big facet. The down payment and the time it would take to save 20%. So that's why I'm here spitting all these boring stats and facts and figures to you. It's harder to save 20%, but you have ways to beat the game, and let's find a way to win with the hand that we've been dealt right now. Don't get suckered into the snarky blame game. If you're listening and you want to do this, let me help you beat the system and make this possible. Okay? That's the real, real on how I feel for all my podcast listeners that are discouraged. And frankly, I'm kind of pissed off that there are trolls out there feeding you this terrible information. It's bad enough that I have to fight the real estate industry, my industry, for not bringing enough clarity to help you out, but now I got to reverse your mindsets because there are people out there with nothing better to do and sit around and whine and make all kinds of crap on the Internet for you. And they're not even offering any solutions. They're just whining and complaining about how easy it was back in the day, never helping you with the answers, just making negative noise and preaching hopelessness. In fact, you know what? If you're one of those people, meet me over here at camera two. And if you're listening to the podcast in the car right now and you've got kids, time to turn it off or hit the fast forward button. Hey, you, Captain Whiny Pants, shut the F up. I'm so sick and tired of you trolls bitching about how the boomers messed everything up. And don't even try to put me in the category and say I'm one of those boomers who says that everyone was younger is entitled, that you don't understand the value of hard work. No, I don't think you understand math. Yeah, Jack. Things cost more in the future than they did in the past. Welcome to history. And no disparity is nowhere near where you think it is and where you claim it to be. And even it was so different. So what? Things change. You want to better. You won't find a way to make it work. You sound like a blacksmith who's bitching because the Model T is putting him out of business. Stop bitching about the Model T and start figuring out what you're gonna do next. Yeah, it's called progress. It's called change. It happens. Adapt or die. Do you realize that if you spent all the time that you spent bitching and whining on social media and telling everyone about how terrible it is, if you spent the time adapting and figuring out some new skill that other people would pay you for, you could afford the lifestyle that you say is taken away from you. Stop scaring people into complacency because of your fearful words. Stop telling people there's no hope since the American dream was taken away from them by the generation before them. You know, all those greedy bastards. The American dream is about ingenuity. It's about adapting. It's about evolving and progress and people. I'm trying to help the people out there listen to this podcast. They deserve solutions, not complaining. Stop policies polluting society with your do nothing vest and get off your ass and find some solutions. And if you can't do that, get out of our way. The economy changes all the time. The world changes all the time. If you believe what you're saying, stop making memes and whining about it and start doing something about it. Find some solutions. Better yourself. Adapt. Start a protest if you want to, but you better make sure that you understand all of the math and you know what you're talking about about, because right now you're way off. People need answers, not incessant whining and complaining. Run for office. Shut the up. Okay. Well, welcome back to the how to Buy Home podcast. Your home for practical positivity. Sorry about that, gang. Looks like you got to see something that's Been festering for a little while. So let's get back to the answers to your questions about, you know, planning for and buying your first home. Now, where was I? Moved to Hollywood, didn't buy, could have paid $104,000 in rent, could have bought a nicer condo with that money to break even in eight years and I would have got $10,000 back on that plus the $30,000 initial investment. Even though this imaginary condo that I could have purchased would have lost value immediately. In other words, I was buying in a down market and I would have done this all. Making this purchase at 9.59% interest would have cost me $1,311 a month in PITI. That's just $61 more than the rent that I actually paid for eight years. So for those of you super nerds out there who did the math, yeah, it was $61 more a month. So let's multiply that by 12, that's $732 more annually, multiply that by eight and that would have been $5,856 more. So just to be fair, I will subtract that 586.56 from the 10,000 do that I made on the profit in a break even sale. Confused yet? Told you it's going to be a lot. So that means that Instead of the 10,000 extra profit, I got $4,144 actual profit. And yeah, when you factor in the cost to sell the home, because remember, I wanted to move out in 1998, if I'd sold it, that $4,144 would not have been enough to cover the cost. Remember, to truly break even in the value of your home when you're buying it and then you sell it later, not including the payments that you put into the principal, you have to factor in a 7 to 8% sale of the property. So yeah, that's a lot of math to figure out. But I didn't go to camera two and start yelling at all the haters without bringing all the legit numbers to fight them off. Who said anything about selling? We're talking about a new game plan. Remember, in a changing market, you have to think long term. So is buying going to be right for you if you're going to move at some time? Well, maybe not. If you want to use the profits from owning that first home and pull them out to buy your second home, that is today's. Well, it's a punch you in the face reality. You missed that you missed the opportunity to buy your house and in two, three or four years sell it and get a profit. Now you still could. I don't know what's going to happen in 22 and 23 and 24, but I'm not saying you should plan on it. If you're looking to buy and then move in 10 years or less, it's time for a new plan. So number one, like I said, you can fix this by moving fast and try to catch any of the remaining run up in prices and get some equity because the recession's coming and things are going to slow down. Might be in a few years, but it could happen in a few months. Who knows? Number two, you recognize that you now actually do have something tangible and mathematical that you can complain about. This is actually happening right now. Regarding your timing, you missed the run up of the decade. That's no one fault. It's just history. That's the way it works. So let's talk about solutions. Let's keep learning from my mistake. Now, in 1998, when I would have been break even, interest rates had dropped from that crazy 9.59% to 7%. So I could have moved, I could have kept the home, refinanced the $110,000 that I now had left and gotten down to a payment of $1,000 a month. Now, staying totally fair to the math back then, I'm not even going to bump the rents up because rents didn't go up during that time. It was a recession. So my rent for that bougie place that I bought, it still would have been $1,250. But my payment for my pit, I just dropped down to 1000 because I dropped from 9.59 to 7% interest rate. I don't think the rents are going to stay the same for you over the next eight years. But to be fair to all the people that I cussed out over there on camera number two. Hi guys. Still love you. I don't want you to think that I'm going to be inflating the facts of the data in any way. Oh wait, that's not me, that's you guys. Anyway, to once again present a fair and actual example to all my listeners so you can find the solutions. I'm not going to include any reinheit in my example. So let's go back to my imaginary condo example. I would have paid $61,061 more a month for eight years. At the end of that, I would add a condo with 110,000 dol. Thousand dollar mortgage now worth 150, which was what I bought it for back in 1991. But now it's 1998. I can refinance down to a thousand bucks a month and it's going to rent for 1250 because interest rates dropped from 7% to 9.95%. Which leads me to another very, very, very big side note, gang. This is all very important stuff and you won't make money off it immediately. And by the time you reap the benefits, I'm going to be retired on a boat somewhere. This is probably the worst sales pitch and business idea in the history of real estate. But I don't care. If someone had done this for me at 21, 22 or 35 and I saw the benefits that I know you're going to see in 10 or 20 years, I would have followed that dude or that lady on TikTok or whatever the social media was that time. And then when they died, I would have gone to their funeral. Funeral for helping me out 10, 20 years ago. Because that's how long it's going to take for you to see the results from this podcast. How's that? Morbid, huh? I think it's cool. Like my man Gary Vee says, I don't do this to get props and likes on social media. I do this. So my funeral is filled with people that I help. So let's get back to it. In my example, mortgage rates sucked when I bought this imaginary condo. 9.95%. So let me put this entire mortgage interest rate debate to bed right now. Now, I understand you guys are listening to this podcast which means you've been studying this home buying stuff for what, a few months, a year, maybe even as long as a few years. But let me explain how interest rates should affect you in my anti immediate gratification solution that I created with my imaginary condo on how to beat a coming recession and a coming downsizing in housing. Interest rates don't matter. Take a look at this chart. It shows interest rates since 1970. We're talking 7.5% back then and it rose all the way up to 18.39% in 1981. And then from 1970 to 2000, interest rates averaged 9 to 10%. And in the last run up in 2000 they were at 8.84%. And then through the run up they averaged between 6 and 8%. So in the grand scheme of things, this whole interest rates at 5, 4 and 3, that's all brand new. Drop in the bucket since 2008. Yeah, the market's been below 5% for the last 14 years. But before that it averaged 8 and a half percent for decades on decades and it survived multiple recessions. So let me help you get some perspective on interest rates. Stop waiting for rates to drop. This could be the lowest we see. 5% might be the lowest we see for 5 years, 10 years. So if you believe in the math I've been giving you so far on buying at the top, like I did not when I was 21 years old, then you want to get in as soon as you can. Because at whatever rate you get in, there are only two things that are going to happen with interest rates. It's going to go up and you're going to be saying, boy, I'm glad I got in at 5% because I could never afford 6%. Just like the people three months ago are saying, boy, I got glad I got in at 4% because I could never afford 5%. And in six months people are going, boy, I'm glad I got in at 6% because I could never afford 7%. That's one thing that could happen. It goes up and you're happy, you're locked in. Or two, it goes down and you refinance and then you're going to get a lower payment. That's how interest rates work. That's it. Those are the options. So sitting around waiting for it to go back to 3% might not happen. It just doesn't jive with the history if it does. See option 2 and refinance. End of interest rate debate. History lesson included. Think historically, not recently. Back to my imaginary story. Bought the condo eight years, broke even, dropped the payment down to 100 to $1,000 a month. So now I can rent it and make $250 a month. So what's the difference? Here's the big what are we like almost an hour into this thing? So what's the difference between buying and saving? Up for down payment while I'm waiting for the market to come down, or renting? Well, as we found out, the financial difference isn't that much. But the real key to understand is that the rental prices versus the price for owning the home, they were almost exactly the same by the month. So at the end of 1998, if I'd saved anything up, that would have been my down payment. If I was a renter. But as an owner, I already own the place and I end up in the same place. So here's the kicker. Now it's 1998, I'm break even. If I'd spent all my time saving money up during that time as a renter, I would have been using the same money now to buy a house for the same price price. But here's the kicker. Down times are always, always followed by up times. So if I hung onto it in 1998, I could have saved the exact same money that I saved if I was a renter to buy my next house because the prices were the same. As far as my monthly payment, I'd be doing the same thing, except I'd be owning a property. And look at this chart. So I'm showing you the median price of a home. The top of the market. The median home price was. It hit 257,000 in 2007. That means my $150,000 condo would have been worth about $300,000 at that time. Now, we already established that my savings plan would have been the same if I rented or bought in the 90s, since my rent would have been the same whether I bought or I waited it out. So wherever I decided to do eight years later when the market was similar to what it is today, I could have saved the same. Either I would have had nothing, or I would have had this home plus it already at this point, right now be making me $250 a month. Oh, wait, no, Actually, rents started going up after 1998. So by 2007, I'd actually be charging 1750amonth instead of 1250. So instead of making $250 a month on my refinance, new 7% loan on the $110,000 that I had left on my principal, that's $3,000 a year. Well, I would have been making $3,000 a year in 1999. And then with the incremental rent increases over the next eight years, because rents went up, I'd be making 4,000 a year, then 5,000, then 6,000, topping off at $9,000 a year. Now that's $750 over my thousand dollars a month times 12. Oh, and wait, it would have been even more because guess what happened again? That's right. Interest rates dropped in 2003, so I would have refinanced and, you know, approximately maybe $100,000 I had left on my principal and my new PITI principal payment, that'd be $850. So if you're not following what's going on, I own the place in 98, I decide to keep it. Rents go up. Now my cash Flow each month goes from 250 to 500 to $750. I refinance in 2003. And I understand that's a lot of math, but if you stay with me, this could be your future. Now, maybe you can't afford to buy a home in the area that you live above the national average, but if you're going to live there even a few years, you can figure out a way to buy and pay a mortgage because you're going to pay this anyway and do this plan. The other option, of course, is to maybe just buy a forever home and ride it out. And in the long run, you're going to do just great. So back to my example. If I kept the home through 2007, if I was making three to nine thousand bucks a year in cash flow, and we include the new payment drop from 2003 when that refinance went, that ups, you know, all my rent payments to $1,800 a year more for the last four years. The grand total is about $70,000 in rent that I would have collected. Plus I would have owned the home that now is going to be worth 3, $325,000 and I only owe $100,000 on it. I only pay $850 a month on it, and my rents are $1,750. Now, what if you say that sounds great, David, but then the investment tanked in 2008. We all know that. So your numbers suck. I should have listened to that troll over there that you were yelling at on camera two. Well, do they suck? Do they? Sure, home prices would have dropped and your great investment in 2007 would have tanked. 2008, 9, 10, and 11. There's no way you would have figured out how to sell it in in 2007 to see the big bubble that was coming. But here's the big kicker behind that. Do you know how long it took from the 2008, 2007 very, very top before it came back, before the biggest real estate crash in history recovered from 2007 at the very top, we were back to that exact same home value in 2013 in less than six years. And in those six years, if you've been paying attention, you think there's a lot of haters out there talking to you now. Now, back then in that slump from 2008 to 9, 10, and 11, you would have think that buying a home would mean you're the biggest idiot in the universe. Yet in just a shoot, a few short years, from 2007 at the top. We were right back there in 2013. And if I kept it during that time, the value would have gone down. But who cares? I'm not selling it. Because guess what? Rents went up another 200 bucks in 2012 and 2013 while the market market fully recovered in the price. So now, 2013, 22 years after I made this initial investment to buy this imaginary condo, when the market was going down, I would have made over $100,000 in rental money over that time. My loan at this time, 22 years later would only be about 33% of what I paid for the property. And the property would have doubled in value by that time. And the kicker is I only would have broken even in those first eight years. But if your whole reason for doing it is you're saying I need to.

Save up money for my down payment.

The cost of it was exactly the same monthly for those eight years. And wouldn't you love over 22 years to have $100,000 in rental income coming in and now have a property that's double what you paid for it with almost nothing of a mortgage? Look, I understand this is a lot of math and I encourage you to go back and look at this video or re listen to it multiple times. Read the transcripts on how to buy a home dot com. You can read it over and over and over again. The reality is, this is where we are headed now. Is this the only foreseeable future? Hell no. But if the recession and correction does happen sooner rather than later, this can be one plan to help you beat the system by leveraging your monthly rental payment over these next few years when you're going to be a renter. I can't help but that you're going to become a renter at the top of the market, maybe moving into a correcting market. This is where we are. Your situations are going to be different and each and every one of you is going to be able to cash in on this plan. If you did my imaginary plan, you could cash in a bunch of different times. You could cash in 10 years, 15 years, or wait the full 22 like I did. And I do want you to keep in mind, in my fake example that I gave you guys, I kept it totally straight up. I'm being really straight up with the numbers. I'm not selling you. I'm not giving you any slanted numbers to make things look better because I cut it off at 22 years at 2013, which is the date that the market completely rebounded during the worst first crash in history. Now if I was selling a seminar, I wouldn't have made it 22 years. I would have made it like a 25 year plan because 13, 14, 15, 16, the market went up and the home would have been worth even more. Or it would have made it a 30 year plan where the home was paid off completely. You made $150,000, $200,000 in rent and the home's worth $400,000. But I'm not not selling a seminar or workshop or trying to get you to buy a home and sell a home with me. I'm giving you the real numbers, how this can help you even through the worst crash in housing history. It's guidance for you because I screwed up. And now that I know better, I want to help you avoid the mistake that I made. Nobody makes a fortune in a recession by talking to you. That's right crappy to say, but it's the truth. Nobody makes a ton of money helping the little guy during a recession. It's not sexy, it's a long play. I mean, what are you going to do if I'm living off testimonials on my website? What am I going to do? Wait 20 years for you to give me a five star review? So what happens in these times? They the rich people ignore you and they make money for themselves. Recessions are for the rich. All the fat cat wealthy big dollar players know that when things suck in a recession for the general public, that's the time that they invest big time. Because they know all the whining and the crying and the, the fear is so short lived. Because if you look at the history, the rebounds always happen and they always happen faster than they think they will. So today I'm going to tell you, you do have a little time left. It's good, it's not great, it's good. Heading towards. Okay. I always tell you if you miss it, there's still a play for you where buying beats renting. And my example that I have, that's not the only one. Maybe you can buy your forever home and it's still going to be cheaper to do that at 5% today. Especially if interest rates never get below 5%. I mean they didn't for almost 40 years. And maybe you can start the plan that I should have done. And maybe when you do that, I gave you the 22 year plan, remember? The imaginary scenario I made up for you has the worst drop in housing history. So maybe you're going to do even better than I did without that. You know, instead of 22 years, maybe you're going to have those numbers in 15 years or 10 years. Look, I cannot predict the future. I can't guarantee. I can't take all the data, get you informed to make sure that you're making a decision not based on fear. I want you to make one not based on research from just the last five years. I want you to make one not based on some realtor trying to sell you something without giving you all the true and honest opinions. And I definitely don't want you to make it based on that Internet troll over there on camera two spewing all the fear and all the facts. Do I have to cuss at you again? Okay, no matter what the market is, there is a plan. Buying yesterday beats renting today. And for the next few years, if you have the right guide, you can make this happen. So let's go. Let's do this. Because you can do this.