Mike Minute Mastermind 08/02/2022

Good morning, Augusta Nation. Hope you're doing super well. Let's go ahead and jump in. In terms of announcements, I didn't really have a lot of announcements. I do have some stuff I want to go over after the questions in terms of education. Let me just see here. I want to confirm. I didn't have any announcements.

Cool. Yeah, I just have a couple things to go in terms of education. So let's go over some questions first and then we will talk a little bit about some questions that people had about rates, comparing mortgages. So I actually have a couple from the Mount Vernon house that I just purchased and I'm going to show the different types of rates you're going to get from a.

Lender. So a little bit low because we just have to fire a couple people. It's not fun. I hate firing people. I never find any joy in finding, in firing people. And you know how it is when you fire someone, they just spew all over everything that you do. So it's okay though. We all know how it is. You gotta bounce back and it's okay. So let's go ahead and hop into questions. Share.

Window. Boom.

Okay. Why is it on number two? Number one, Dustin started listening about short term rentals and wondering if you have, if you had to have some kind of license for this. I was listening to a guy that had a couple in Nashville and he said one of his rentals had to be long term because. Because of a permit he cannot get. Yeah. So every single. This is the biggest risk to short term rentals, especially if you're trying to ramp it up and scale it up as a business is regulation is city to city. So there's not like a national thing saying, you know, these are the regulations when it comes to short term rentals. It is very much. Every single city can make their own rules and regulations. So for example, in.

I think it's Manhattan, you can only have one. You're only allowed to have one short term rental. Anything above two, you bet you can't have it. They're just not allowing it. So every single city is different and typically the more urban areas are regulating it a lot more. Some people say it's because like the hotel industry is putting pressure on them and lobbying and things. I would say it's more just a matter of. It is a city planning issue. When you have a lot of short term rentals. It's difficult to do a lot of things like certain types of infrastructure. However, every single state and every single city is handling this very differently. A lot of the suburban areas though, it's like, it's not a big deal. It doesn't put more stress on parking or traffic, things like that. A partying isn't an issue. It's a lot, a lot of times the reason that cities will start regulating is because it becomes a party thing. You know, people get a big house and then have like 50 people over that, that sort of deal. So you just got to watch which states you're buying in which, which cities and municipalities you're buying in. Some of them have very strict rules when it comes to Airbnbs and short term rentals. I think actually what's going to happen over time is regulation will become more standardized and that will be a good thing. Regulation is a good thing. Same thing with like cryptocurrency. When regulation steps in initially, it's like, oh, it's so bad. It's like, no, like we need regulation so we know the rules of the game are, and that's what it's going to be with short term rentals and Airbnb, in my opinion. So if you're looking for an Airbnb or like some sort of a house hack, just make sure you look at your local city and, you know, just search, literally just search like short term rentals, your city name, and you'll get a whole bunch of information. Sometimes they require permits, sometimes they don't. Sometimes they require, you only have a couple, sometimes they have no restrictions whatsoever, basically. So if you're doing in a house, like a room in your house or you know, a property that you're kind of subdividing, it's. They don't really care, like, unless you're talking like very urban areas. When assembling a board of directors, are there certain personalities or school sets I should be looking for? What kinds of people would you recommend? I'm currently thinking of including a friend who owns a software coaching business and a relative who owns an accounting firm.

My unpopular opinion on this, my unpopular opinion on this is that the time it takes to assemble the board and get them all together is when you're a small business is not the best use of your time. Because when you're a really small business under say 500,000, the only thing you should be thinking about is closing more deals, your close ratio and hiring enough people to get the work done. And so having a lot of strategic thinking at a small size business is really not necessary. Like there's nothing strategic that needs to change in your business to get it from zero to like 500,000 revenue. It's like, get more work marketing, hiring. And so I have seen a lot of times when people start thinking about board of directors or they have a. You know, they try to create a board. I understand this. There's a book I forget. I know EOS talks a little bit about it, but another book that talks about Michael Michalowicz has, like, kind of been the one that pushing this. And that is like getting a board of people that, you know, other friends that could, like, help with the business. I really just. I see so often the times when that happens, people get distracted with the five different directions that now the board members have. Like, oh, you should think about this, or you should think about that. You should think about this. Like, the only thing you should be doing from 0 to 500,000 is focus on execution of sales and getting the hiring of people to execute on those sales and perform the work. So.

I see it most of the time for small businesses, a distraction because they get too many voices telling them 10 different ways to do something, right? The coach, the guy with the coaching business and software is like, oh, man, you should try this new software and you should have it all integrated and this new app. And then the person with the accounting is like, oh, you got to, like, in addition to QuickBooks, you have this integration. You got to do these reports. And those are all fine and good. All fine and good. But it takes away from the thing that's actually going to move the needle for the business at a small size, which is going to be sales and hiring. That's basically it. And so everything else after that, in my opinion, is a distraction. And once a business becomes much larger, that's when, you know, we can sit and have a board meeting and spend $500 on dinner to talk about strategy or things we might want to change or people's perspectives. But in my. My humble opinion is you can listen to podcasts and books and get a lot of really good feedback without having to put together a board or getting a bunch of distracting opinions. And so it's not to say that the opinions are wrong or bad. That is not what I'm saying. It's that they're distracting you from the one thing that you should be focused on. So, all right, let's talk a little bit about education stuff. So I think it was Andy Burleson had mentioned it in the Facebook group, and I said I would share. Let me go ahead and pull this up. This is comparisons of two different loans, which I didn't get either of these. Exactly. But they're just to show you what to look for. So when you get pre qualified or, or you go to. More importantly when you get an actual property and you are starting to compare loans against different lenders. Let me go ahead and take this down so I can share.

Share this. Share that window. So the first one. So this is an online lender that originally was. Make sure I don't have like my Social Security number on here or anything. I don't think I do. Cool. So this is what you're going to get in terms of a loan summary. And you can see here like the appraised value, the loan amount. So like was that 80%. 80% of the loan to value primary residence 30 year fixed gives you all kind of the, the information you need gives you the overall rate in terms of you know, 5.375 what your kind of guesstimated principal interest is going to be. This does not include your mortgage or your, your, your taxes and insurance with taxes insurance for example this property right around $3,000 per month. So this is what you're going to be seeing. Let me make sure you can actually see what I'm looking at. Good. This is from an online lender called Blue Spot and this is who I was going to use first. And because they're so cheap like they're, they. If you compare these closing costs to like other lenders it was so low like the title 500 typically that's like 7 or 800 the appraisal fee they, the other lenders would be like 1200 like so their closing views are great. I found them online, I'm like let's go. And then I got into underwriting and they were just a pain to work with because they want very much cookie cutter loans. They want W2 income and they want to push you through a matrix and give you a loan. They do not want to work with you. And look at your like I'm like yeah, I got all these businesses and I have it all like pretty organized so I can send it out. And as soon as they saw it they're like this is going to take us a very long time. And and when I even like put the thought out that mails go back to my old lender they're like yeah, that's okay. They didn't even like push back on it. So I'm like okay. They obviously do not want to be trying to put together. It does take a long time. As a business owner, your loans take way longer to underwrite than someone with a W2 income that just slaps it down in their face and they run it through a chart that tells you. Tells them how much they can lend to you. So this was going to be a lot cheaper for me. I ended up saving or spending about $5,000 more just to buy down the rate on this other loan. So let me go ahead and show this to you. This is not the exact one that I went with, but it's close. It's close to the one I went with. Okay. So I ended up going with five and a half percent interest rate.

You can see here, let me scroll, scroll, scroll. So here we go. See this right here. Discount points. Discount points is when you can buy down your interest rate. And several weeks ago we talked about this, how to determine whether or not it's wor Buying down a loan. Essentially what we want to do is figure out how much savings every single month you're going to have by buying down the loan. Let's say it's $100 a month. And let's say you know that it takes you from a 5.6% to 5.2% by spending $6,000. Okay, great. I say I have $100 per month on my mortgage. And that would mean that I would have to stay in this house for 65 months, $100 a month. I'm spending $6,500 to buy down the mortgage, buy down the interest rate. I should say. I mean, I have to stay in this house for five years, a little over five years in order to make it worth it to buy down this loan. So the question is, are you going to sell or are you going to refinance in the next five years? The answer to that, yes, you should not do discount points. That's basically the math on it. So discount points is why this loan is 5.375. I ended up going for 5.5 and not buying down the loan as much. But I did buy down the loan a little bit because I don't think that we're going to see like 2 and a half and 3% interest rates for quite a while. So I did go ahead and do that. But this is kind of what you're looking at and you're. When you're comparing, I always recommend you compare loans. I did use the Blue Spot loan and literally sent it to Umpqua, the bank here that I'm talking about here. I literally sent it to them and was like, hey, can you match this? And immediately it saved me. They brought down like 0.2%, which saved me like, I want to say like $120 a month on my mortgage just by like comparing loans. So I definitely recommend you go get a couple loan summaries. If you're going to buy a house, you can typically this with like a loan broker, a mortgage broker, I should say. But typically they're going to take a 1% fee. Right. So they're going to take a 5, $6,000 fee for finding you a loan just being a mortgage broker. So you could literally go online. You're going to get really cheap loans on there. Like from bankrate.com you can you put your information, they're going to give you a really good loan summary that's super cheap. That's where I got the blue spot one. But then I went to Umpqua, who I've done 1, 2, 3, 4, no, 3, 3 properties in the past. And so they know me really well. I knew they would like push this loan through super fast for me. But I just, I sent hey, I'm like, hey, I want to do business with you guys. But I did get another loan summary. Here it is. Can you match it? And they're like, hey, we can't match it, but here's what we can do. And they immediately saved me like 120 bucks a month. So I recommend if you're going to buy property, you get two loan summaries, compare the two and then realize that when you hit underwriting, it's a different thing. Like they'll give you a loan summary and then they go into underwriting. And so keep in mind that if you don't go with a local bank or someone that's going to work well with you that as a business owner, a lot of times these online lenders, they're way cheaper, but they're not very good at underwriting and therefore they're only good at cookie cutter W2 loans. So that is my 2 cents there questions. Something else to think about after you becoming a real estate agent. I don't know about Washington, but in Oregon you have to work under a principal broker for five years and they will want 1% typically of on all your deals. Yeah. So you actually have to work under a. So there's, there's a broker that is a real estate agent underneath, what's called a managing broker, which is where you're going to hang your hat, hang your license underneath. Because you can't just be a real estate agent like by yourself. I can't go start like Andy's Realty tomorrow without becoming a managing broker. And so you typically don't want to, especially if you're just investing like one property a year or one every two or three years, you don't want to. So what I'm doing is going to, I haven't done it yet. So what I'm planning to do is get my license and put it underneath the managing broker of EXP Realty, which is an online brokerage. So you pay like 80 bucks a month to just keep your active license and then I believe they take a 20% cut of your of your commissions up to $16,000 per year. So I still will get 80% of what I, I, my, my commissions. So if I'm getting 2 1/2% as the buyer's agent because I'm self representing, I'm going to end up giving like 0.5 of that back to exp or my managing broker and then they have a cap. So if you were actually selling a lot of real estate, exp caps at 16,000. So like once you pay them 16,000 for the year, you don't pay any more commissions. You keep 100% of it. So but you have to and you want to because there's a whole bunch of other things that the managing broker does for you that you as an agent don't have to do. So that's, that would be my recommendation. And typically the managing broker is going to be like a trainer. They're going to help you like put your listings together and put everything together really easily. Again, you don't want. We're not trying to get in the business of being a real estate agent. Like 90% of real estate agents are part time and not worth their time, you know, not worth a single dime to spend money on. And so our goal is not to become real estate agents. Our goal is to get as cheap of a brokerage as possible to hang our license under so we can keep as much of the commissions as possible. And for me, EXP Realty is what I'm going to be using.

Is it still basically non negotiable that you need two solid years of self employed income to qualify for a home loan? Would getting an FHA loan affect us at all? You know what, honestly I have found this out time and time again with banks and it so depends on who you're working with. And it depends on if they're wanting to help you. And it depends on if they're flexible and if they're good at their job and they're really good at underwriting, if they're good at flexible loans and flexible types of financing. And so I would quiz your loan officer a little bit by saying like, hey, have you worked with business owners in the past? Have you worked with new business owners? Have you worked with people that have transitioned out of being self employed, are being employed to being self employed. These are the type of things that like if someone's new, they just don't know what to do. Loan officers I've seen, like some of them are like, let's just be honest, super incompetent. They don't know like anything about their job. I see this time and time again. It's like they just so used of like a cookie cutter thing that when someone actually comes in, like they actually have to start testing like rates and looking at, you know, how do we swing, you know, discounted points and, and all the rest of it to buy down a loan and like they don't know what they're doing. So finding someone experienced with working with self employed people is the key here. I would not say it's non negotiable because I've seen people do it and especially if you've had W2 income and then you switch over like they can use it and they get creative. Like this Umpqua bank that I worked with because I actually went with Blue Spot loans at the beginning and was like two weeks into underwriting, they, when I switch lenders back to Umpqua, first of all, they didn't make a big deal of it because they could have rubbed it in my face a bit, but they didn't. They're like, okay, great, come on board. And they close the whole deal in two weeks. It's unheard of. They just like crammed it through. They've done work for me in the past. They had already had them on my financials. They just crammed everything through. Like that is worth money. And so getting a lender like that is a little bit better than you know, saving a couple thousand dollars on a closing or you know, 0.2% on interest rate if they can actually get the deal for you. Because Blue Spot Loans was literally not going to be able to underwrite the deal for me because they just, they're just not used to it. They're used of, give us your W2, we take that number, your, your adjusted gross income and we are going to throw that through our matrix and give you how much we can lend to you and that's it. So when they start seeing a whole bunch of corporations and W2s and entity structures and distributions and losses, like, they're just. They go cross eyed. So all of that say, hope you all have a fantastic Tuesday. And if you're like me, you get a little bit low when you fire people, especially when they start firing things back at you. You just got to put your head up and know why you're doing what you're doing and let it be like water off a duck's back and just keep moving forward. So best of luck everyone. Have a great day. We'll see you tomorrow.