74: Fake News About Real Estate Buying

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Welcome everyone, to this episode of the Women Investing Network. I'm very excited today to introduce Lisa Copeland, who's not only a dear, dear friend of mine, but has tremendous experience and knowledge in the mortgage and real estate arena. Welcome, Lisa.

Hi, Sharon. Thanks for inviting me.

Well, I'm delighted. We've been dear friends for many years, all kinds of different things. But I just wanted today highlight your experience as the co founder and CMO Chief Marketing officer, the author, Mortgage Associates. It's been a company that's been 20 years, so you've gone through lots of ups and downs and you are standing and doing very well. And as a company, you've topped close to a billion dollars and real estate transactions, right?

Yes, absolutely. I feel like, you know, we did, we muddled through 08, we muddled after 9, 11 and. But I'll tell you, nothing, nothing like the COVID pandemic. So very interesting, very interesting.

Before all this happened, we had an unemployment of 3.2%, historic lows. Our economy was absolutely as strong as could be. The stock market was setting new highs, and then the floor fell out from under us. And of course, we had maintained low interest rates from a standpoint of the mortgage industry. But we've seen tremendous things happen in the last few weeks that shake the ground underneath us. But there are still opportunities. So we are calling today's podcast Fake News and Real Estate Buying because there are still great deals you were sharing with me. And I said, come on, let's hop on and share some information that you've just received about valuations. So share a little bit.

Yeah, I will. Thank you. So I want to say hello to all of your podcast listeners. And just to tell you, I'm in Austin, Texas, which is considered, it's in one of the top 10 real estate markets in the nation, as I believe your market is. Sharon, in Scottsdale, Arizona. People want to live in Texas and Arizona. I mean, we're very desirable for a bunch of reasons, lack of state income tax probably being the biggest one. And so, you know, we were really concerned about not only do I am I the CMO and co founder of Austin Mortgage Associates, but I hold a Texas real estate license. So, you know, I've got a lot of firsthand knowledge of what's going on in the Markets, and we were very, very concerned about three weeks ago. So in Texas, you know, especially in central Texas, I can speak to the fact we own supply and demand. Right? Let's start there. You know, our supply was extremely low, you know, down, down almost 20% from the same time last year. So what that really means is that people are buying, you know, they're buying houses, but they're not, they're not selling homes, right? They're not, you know, they're holding on to them because, you know, they're seeing them appreciate, so they're holding on to them as investment properties. So if somebody buys a home and they don't sell a home, that's when you start to get into a shortage. So over the last 24 months, the National Building association has really been pushing to help small builders and medium sized builders go in and build subdivisions, because the only way we're going to catch up with the demand in these high demand areas, yours included, is to build more homes. Because again, you know, the average person is holding on to real estate now, you know, and we think within five years, you know, most, you know, the average real estate person, someone our age, Sharon, will probably own three homes, whereas compared to five years ago, you only owned your own home. So it's really interesting how the tides have turned. But, you know, one of the things that we deal with all the time, especially dealing with first time homebuyers and millennial home buyers, which we know that those are the absolute future of our country, are these millennials. You know, they'll come to us and they'll say, well, I don't think we can afford a new home. I'm reading the newspaper and the newspapers and the press, you know, they're all saying that, you know, homes are appreciating from 3 to 8% a year. And, you know, I looked at a home in a neighborhood a year ago, and today it's 13 to 15% higher than it was a year ago. And my income is not going up accordingly. So then that kind of mentally shuts down their buying process and their thought process. So why we talk about fake news? And one of the things I shared with you is that wasn't there showing time. Oh, Paul Harvey. And then there's the rest of the story. So, you know, we could talk about some of the things that Covid has done well for our country. And I would say the only one that I could come up with right now is historic low interest rates. Now, we've heard that for the last few years where the Average rates were sitting at about 3.47. But there were days in the market that we've seen in the last three weeks, they were under 3%. But let's just start. Let's talk about 2018 to now. 2020. We have. Because of interest rate differences between 2018 and where they're sitting today, buyers have an average of $48,000 more purchasing power. So to buy that same house.

They don't know that. Yeah. In fact, I'd like to read something to you because I feel like it's, you know, I told you, I get these reports every day that, that we base what we're going to do with our credit lines on it and how we're going to loan money. But I think this is really, really important. So it says, still, even with home growth accelerating, today's low interest rate environment has made affordability the best it's been since early 2018. In the last two years, despite the average price increasing by nearly $13,000, the monthly mortgage payment required to buy the same home has actually dropped by 10% over the same time span due to falling interest rates. So what that really means is, is that prospective home buyers can now purchase a $48,000 more expensive home than they could a year ago.

I mean, that's amazing, world.

Can that happen? But, you know, so when you look at goods that are sold, I mean, we can't see that. But because that particular good that's sold, which is the piece of real estate financed by a mortgage, interest rates drive the entire market. And that's one of the reasons the president made the decision to make, was to drop the prime lending rate to just about zero to open up credit markets. Now, mortgage rates are not based on prime, so don't get excited, everybody. Rates are not sitting at zero, but they do help determine and drive what people are going to do when it comes to purchasing treasury bonds, which is what mortgage rates are based on. So we have a lot of exciting news out there. I can tell you our market, even with the COVID pandemic here in Texas, people are still buying and selling houses. I mean, people have to have a place to live.

That's right. It's recession proof. And if you're an investor in real estate, now is the time to start looking to add to that, because particularly the B and C type properties that are definitely, as you said, people always have to have a place to live. And if you're going to be able to provide that, you're going to have a cash flow situation that's going to be productive and supportive. Now, when it comes to this additional purchasing power, one of the things that has been very popular and one that I've recommended to many of my clients is to really take a moment and reassess their existing home mortgages on refinancing. I'm sure you've seen a lot of that as well.

Oh my goodness. We're absolutely overrun right now with refinances because in the last two years with the housing boom that we had, but now with the rates dropping, all those people want to refinance their homes. So. But you're right, a million percent correct. You know, I mean the less that you can pay in mortgage interest, you know, and I know you, you've recommended to have, you know, people, you know, pay off other debt with their mortgage, which is home equity lending, you know, because you're able to write off the interest, you know, you're able to do a lot of things. And one of the things we also have talked to people about, if they're on a 30 year mortgage now, let's like let's, let's say at a rate 3.6, which was about the average and we can get them down to about 3%, well they can put it on a 20 year mortgage which cuts 120 payments off of their loan for about the same payment. So I personally would rather take a 20 year mortgage out for the same payment and knock 120 payments off, then go back out on a 30 year loan and have a 2 or $300 less payment. But you know, and so, and that's why you want to be careful who you do business with, that they really become your financial counselors. You know, we are all licensed and we do have a fiscal responsibility to present all the options to our borrowers. But especially so where I like paying off debt is when you start lowering the term of your loan. You know, take it to a 20, take it to a 15, wrap in some of that, some of that stuff that you're paying a lot of money on and it's a win because let's face it, if you've got high debt and credit cards, which I know you are very much against Sharon, but it's the reality for some people it would take you 15 or 20 years to pay it off regardless making minimum payments. But you know, buyer beware, if you do that, you need to cut those cards up or freeze them or do something so you don't do it all over again.

Many of Those rates are 10, even a 15 16%, 25% still. Yeah. Criminal. So you have, you know, when you're assessing your financial situation, it's so important to, to say, what are all my debts, what rates am I paying and what opportunities do I have to get rid of the high interest debts so that I can have a healthier life? Because just throwing away interest is crazy, particularly at those rates. Well, and mortgage interest and your credit rating, you're still looking at credit ratings, but when you have that kind of high interest rate, it's kind of a sign that maybe you're higher risk than you should be. So get the credit cards below the 30% of debt availability and start looking at whether you should be refinancing your home to get these lower rates. Because once, once we come out of this market, I believe it's going to soar very, very quickly and you're going to see an increase, you're going to see an increase in valuations of the homes. And I don't think the interest rates are going to catch up as fast. Now there's going to be a window of opportunity. There's going to be a window of opportunity to not only, you know, refinance your own home mortgage, but an opportunity to buy a home if you're a first time homeowner or become a real estate investor. Now, as an investor, you're going to pay slightly more than you do as a homeowner. But at these rates, it's going to make a lot more opportunity for you to have positive cash flow rentals. So it's time to really look at that and just see the ability for, for them to appreciate as well.

Yeah. Because what's interesting on that same report that I got today, and to your point, I agree with you 100%. So right now, based on the interest rates and the increased purchasing power, so historically, the average home buyer has allocated 21.2% of their gross income towards housing toward a house payment. All right, that's historically, but because of the lower rates, the more purchasing power, if you were to do a deal in 2020, right now that would come down to about 15.5%. But here's the kicker, Sharon, and this is where it's better to be the landlord than the lessee because the average person for median rent is spending 25.8% of their household income in rent. That is not tax deductible, nor is it building equity. Excuse me, that was two years ago. And today, right now, based on our market in Austin, Texas, remember, supply, demand, short on housing. So what goes up when there's low supply, high demand. It's 27.8% of the average median income of a renter is being allocated toward paying rent, which I know just sends you up the side of the wall. SHARON LECTER.

Absolutely.

And it's different depending on where you live across the country. It's even higher than that, you know, 35% or more in New York and San Francisco. And you can't get ahead. It's hard, you know, it's hard to get ahead when you have that kind of commitment right out the door before you even buy groceries. So it's so important now to take, you know, one of the things I talk about this pandemic is it's a global reset. And so it's a chance for us to reset our lives and say, look at every aspect of the life. Now, today we're talking about mortgage lending and buying a home or refinancing or looking at investment properties. So we're going to focus on that. But now is the time to become a master of your money and make the decisions and take the action to get your mortgages and your debts in line. So. And Lisa, if people are looking to find the Austin Mortgage Associates, how can they find you?

The best way to find us is at Austinmortgageassociates.com or you can always find me at Lisa@lisacopeland.com or just lisacopeland.com Sharon, I appreciate you you talking to me. You know, I've just learned so much from you over the years and studying all of your financial principles and in following what you have done with the money schools and all of your teachings and your books. So I greatly appreciate it and I definitely have such a great appreciation now of assets. I will never think of assets the same again because they are sexy.

Assets are sexy.

I mean, look at data. I'm kind of a data galaxy, and the data says that is sexy. 15.8% of my income versus 27% if I rent. That gives me a lot of shopping power in between. Exactly.

And as you so kindly said earlier in this interview, women our age, and I'm significantly older than you are, but she's not. The older we get, the sexier our assets are. So it's very important for particularly women to pay attention to their own financial acumen and their own financial assets, because financial assets are sexy and we need to continue understanding how to buy them, how to maintain them and how to invest them so that they and how.

To protect them, you know, and one of the things that I just want to, you know, stress, which I know you will, too. When we look at our real estate portfolios today, right now in the middle of this pandemic, they have not recessed or declined at all. We go and we look at our stock market and we're down 20, 30, 40%. Now, you're not down in until you sell something. So of course we don't want anybody panicking and selling. But just know if you want to build real wealth in today's world, it's not going to be in the stock market. I think you can go in and get some deals, but it's going to be in real estate. So, you know, with that extra money, the difference between being a renter and being a homeowner, you can almost have two homes, an investment home and a homestead. So I am creating a home buying course that will be free. And Sharon, I'll be sure that you get a copy of that so you can send it out to all of your listeners. But it really does take you through, you know, the ABCs of homeownership and what you need to do and how to do it, because I feel like, and I'm just like you, Sharon, I'm extremely passionate to help women make good decisions. We happen to live a little longer than the boys do, and so I'm not going to count on Social Security being around. So what are we going to have? We're going to have real estate that pays us, just like you teach. And I learned so much of that from you that you want assets in your portfolio that throw off cash flow every single month.

Yeah. They become economic engines. So, Lisa, thank you so much. You are a true treasure, a dear friend, and you've accomplished so much in your life that we didn't even talk about today. So you are a true role model for women everywhere. And as we come to the end of this segment of the Women Investors Network, we do it together. We learn together. Don't stay by yourself. Reach out and learn and create your own investment club so that you can learn together and have a glass of wine doing it. So thank you, Lisa. Thank you, everyone and appreciate your participation in this segment of the Women Investing Network. Have a fantastic day.

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