The Power of Buying in 2023

What's up, everybody? I hope everybody's having a good night. Thanks for joining. Very excited to kind of do this and just kind of talk about this. You know, the power of buying real estate. I think a lot of us are a little bit shell shocked right now in the current market. Some people are, you know, still on the fence as to what to do. And so hopefully Kelly and I can give you a little bit of insight just to what to expect and what you should be planning for. And hopefully by the end of it, you'll have a little bit more insight as to what you should be thinking about and considering in order for strategy moving forward. So I'm Steve Ballantyne. I've been a real estate agent here in the Phoenix area for 24 years. I'm getting old, right? I mean, I've actually had a real estate license longer than half my life. And I've seen a lot of changes. I've lived through these markets. It's one of the things I want to talk to everybody about tonight is, you know, one of my greatest regrets was not having a mindset of getting prepared to buy something in 2008. And if any of you around during that time, you probably wish you would have bought something back then, too, because back then we were buying $20,000 house houses, and now there are $400,000 houses. And I would definitely, probably be retired at this point in time. Had a different mindset. So that's kind of what we talk about. And I think Kelly would agree with me. I want to introduce you to a great friend and lending partner, Kelly Zitlow with Keller Mortgage. She is a rock star, and she strategizes like I do. It's one thing that you will hear from both Kelly and I is that we're here to help you strategize and create a game plan not to sell you anything. And so this call tonight is 100% about just giving you guidance, because I know that several of you that are on this call, you all know 12 to 15 realtors. By the end of December, it'll be more like seven Realtors because seven of them will have gotten out of the business because they couldn't hang with this market. Right. I think the most recent stat that I just saw was 34% of the real estate community is out of the business as of October because of what's happening in the current market. So we're still here, we're still alive, we're still doing this. And I have been for 24 years. And I'm not going anywhere. So thanks everybody for joining. Kelly, you want to do a little introduction of yourself?

Hey everybody. I'm so excited to be here. Kelly Zitlow, As Steve mentioned, I have been lending in the Arizona market for over 26 years, which means I started when I was like 13. That is what we are going to go with today. So the advantage to that is that we have seen a lot of market cycles. And I would tell you that really just it's okay. There's so much opportunity, even when the national media wants to tell everybody to run and hide. This is where smart people are kind of zagging when everybody else is zigging, if you will. So I'm super excited to be here and really I'm just here to kind of answer any questions that have to do with home lending, mortgage rates, whatever is just ask in the chat or I'm sure Steve will ask me a few questions as well. We'll just kind of dive into it. So it's really informal and happy to be here.

Awesome. Well, thank you for taking the time on Wednesday night. So here's one of the things that I think everybody needs to be realized no matter where you're at, is that there is zero perfect timing in the real estate market. The only things you know is what you can control right now. Right. Same thing last year. You could have controlled and got a really good interest rate, but you paid higher for the price of the house. And some people decided they were going to sit on the sidelines and wait and waited out till the prices came down, but nobody knew the interest rates were going to double or more than double. Right. So you know, a lot of buyers, they, they buy houses on payments, not on sales price. Sellers sell on sales price. Right. So when we can't qualify, what does that look like? And so we're not having a value issue in the current market. We're actually having a qualifying issue. Right. So when the rates double, Kelly, how many, how many buyers does that knock out? Like on the medium price is about 454,75 right now. Like how many buyers did you see get knocked out of being able to qualify because the interest rate doubling?

It's a great question because I would tell you that in 2021, let's just use that year we had so many buyers that were pre qualified at that three to three and a half percent interest rate. But because of the market conditions, those buyers didn't get to have an opportunity to even win. I mean, they could not compete in that market. So I like to tell buyers that even though it's harder to qualify for some because the higher interest rates, there's more buyer opportunity now to compete than there was in 2021. Unless you were willing to waive your financing, contingency your appraisal, contingency, pay over list, and then still compete with 10, 20, sometimes 30 different offers. It was especially difficult for first time homebuyers. So, you know, I think it's just one of those things that every market has some unique nuances to it. And so while it's a little more challenging right now, there are some great programs out there that do help people affordability. So that is just a difference of the market we're also seeing. I mean, at least here in the Phoenix metro area, in November, 49% of all the sales had some type of seller concession on it. So that's the market kind of responding to the affordability issues that higher interest rates have brought. And so if we're getting, you know, $10,000 in seller credit, let's just say that we're able to use that money to buy the interest rate down and still create affordability. So lots of different strategies and options out there.

Yeah, this is, this is where the buyers get to give two middle fingers to the seller in this market because the sellers are giving everybody else the middle finger a couple of years ago, right? The buyer's like, yeah, watch this. You keep your damn house. I'm gonna go to the next one because, you know, they're more motivated. So the tables have definitely turned in that nature from that standpoint. So I had to start with a funny slide just because. So, well, let me get into it here. So I let my kids cut my hair during COVID when we were all on lockdown. And this is what they did to me. And the market is not this bad, right? So everybody thinks it is. So we're just going to kind of go into a few things as to why it is so important. So one of the things that is really important, this market. I love this book. It's a great audible book. It's called the Road Less Stupid by Jim Cunningham. And it's not what you see, it's what you don't see. So again, a lot of the focus in the current market is about what we're seeing, right? So let's like look at that. Right? The focus. If you're watching social media, if you're watching your emails, you're watching the news, all these things are giving you all the negative side of how bad the market Is right. And so when you start really looking at what you don't see, it changes the perspective, right? So for those of you that don't know me, one of my big things that changed is looking at the power of real estate and what it actually does for you now and in the future. And I think a lot of times as buyers, we're looking at the right now, but we're not looking at what the power is going forward. I think we can all agree, Kelly, definitely is that one of the things that will change is interest rates, right? They'll go up and down, right? We could be seeing interest rates right now. Kelly, what are they at for? Like, I guess, middle of the road interest rate, middle of the road credit, all that stuff kind of in the mid.

The mid sixes right now. So interest rates actually came down. We were treading kind of in the low sevens there for a while and they've dropped a little bit. But you guys, that's a point in time and it's so important to know that that is based on a million different assumptions. So interest rates could be anywhere for any person between, you know, depending on the buy down, could be anywhere from, you know, the fives up to the mid sevens. I mean, realistically.

So in the real estate market, you know, again, the power of real estate and what it does for the future. So I'll give you kind of a quick version is, you know, when my dad passed away at age 63, he helped hundreds of investors, built massive portfolios in the 2008 chaos that happened. And by the way, you know, if you lived through it or saw it, please don't compare the two markets. They're completely different, right? The 2008 market, you know, when I was in it 05 to 07, it was completely fictitious, right? It was propped up by stupid loans. And you know, when your dog could get a loan, your cat could get a loan, a stripper could get five loans, like there was just no sanity in that market, right? And we haven't seen loans like that in the last decade as far as subprime, high interest rates, no money down. You know, all the things that was what propped the market up. The market we have now, there's still a ton of equity in it. We're not going to have a foreclosure crisis. So if any of you are talking to your friends going, yeah, everything's going to get foreclosed on. Just FYI, in 2008 in Maricopa county, they were foreclosing on 5,000 homes a week, 20,000 homes a month or 240,000 homes a year. Right. Or more. And right now, watching the foreclosure trends, even the notices of default, which is after you miss 90 days of payments, there's a notice default comes out. And what that does is there's like maybe 200amonth being filed right now of notice of default. Only about half of those will actually go to foreclosure. And when you actually dig into the details of those foreclosures, they had to do with deaths, they had to do with probate. None of them really had to do with somebody losing the equity, losing their job, or any of that other stuff. So we need to get over, like, what happened in 2008. That is not going to happen again. Could we see a little bit of decline? Possibly, but are we declining? And again, I like to look at stats, but I hate the stats that are being delivered right now because they're not truly what the details of what's happening. So some of you have seen reports, right? I just read one before we got on this call that's talking about how many price reductions are having. Right. So let me give you a stat which is really interesting. I coach a lot of real estate agents in the investment space and investing in real estate. So in my coaching program this year, 90% of my agents have had their license for less than 10 years. Why is that important? Because the real estate market, if the average agent has had their license less than 10 years, all they've ever seen is the prices go up and the interest rates below. They have no idea what this market looks like. Right. I entered the market in 2000. Kelly, when did you start lending?

96.

Oh, God. I just got out of high school. Thanks.

I will be leaving this call right now.

So. But my point is, is that that's all the real estate industry is known. So what happens is there's a lack of education in the current market with how to compete in this market. So I lived through the REO or the foreclosure days. And back then we were trying to price houses three months down the road that are actually going to be lower than what they are right now. Right. So I've seen all that. And so I think it's really important that if you are going to look to buy that, you find somebody that's educated in this market and really understands what's happening so that they can give you the guidance that you need for the long term. So the point to all that is that, you know, I realized the power of real estate and realized that there's no perfect timing and you have to start somewhere, right? So I bought my first house in 99. The interest rates were 8% in 99. Now, granted, the house is only 100 grand, so my payment was a thousand bucks a month. So it's a little bit different now, but you got to start somewhere, right? So I chose to go buy something that was out west. I could afford a little bit more house then, and that's what I bought, right? So I didn't go and go, well, I have to be in Scottsdale, but I can't afford it, so I'm just going to rent because I can't live. My parents forced me to understand the investment side of real estate and start investing from that standpoint. So this is part of what we want to talk about tonight is that it's not just about buying a house right now. It's about your future. And what does the future look like if you start down the investment road. So whether you're in the real estate business or you're a first time home buyer, you might even own a house currently. And I'll talk about that in just a second to where there's some great things that you could be doing to take advantage of this market. If you understand all the variables going on right now and the fact that investing in real estate is actually the greatest place you can invest money and the least amount of money for a very large investment. So dive into that. By the way, if you have anything. Garrett, my awesome media guys in the background here, he'll read the chat. So if you've got a question you want to throw in there, we'll interrupt and kind of take some questions. Here's the issue right now. Social media, everything, people, even my own industry, everybody's bitching and complaining about the interest rates, right? That's the only focus. I can't sell a house because of the interest rates or this won't work because of this, or these people can't qualify, right? So there's a constant focus on this one negative thing. What's not happening is we're not focused on the positive things that are happening in the market right now, right? So what are those things? So I just kind of threw them in here. Little Christmas decor. These are all the things that buyers didn't experience last year, right? And actually, all the way up until March of this year, the buyers didn't experience any of this. Right. If the buyer coughed wrong, asked for a repair, the seller, like, I'm canceling I'm gonna go get $10,000 more for it, right? And everybody's just ruthless. And for those of us that are selling real estate, it was tough, right? You were constantly breaking people's hearts like you lost another one. Like the 30th try didn't work, right? But now, even though we have the one negative thing, we're not focused on the other things, which are the more important things as a buyer, right? So we have more negotiation power right now. We've got more houses going to the market. You've got more motivation to sellers. And I'm telling you this from personal experience, right? The music stopped in the musical chair game in March, and we buy a lot of homes that are in distress, and we do a lot of flips and we do a lot of investing. And I'm one of those people that got caught without a chair when the music stopped, right? So we've got a handful of houses that I'm extremely motivated to get rid of. I don't like losing money, but I'm willing to do it to stop the bleed, right? So there are people out there that bought houses, got caught with their pants down, and now they're willing to get rid of it and lose money so that they can move on, right? So those are some of the things out there is like, how do we find those more motivated people in this market? Right? So there is some negotiation power out there if you find the right thing and you're patient, right? So this is all part of the real estate game. If you understand the strategy at its finest when we're going out to buy. Seller motivation. Like I said, if there's so many sellers out there that are having Chicken Little syndrome that, oh, my God, the market PTSD of 2008, I'm going to lose money if I don't get out now. And the problem is, is if I was a seller and I didn't need to sell my house, I would stay put. And a lot of Those sellers have 2 to 3% interest rates. They should just keep the house, right? Whether it be a rental or whatnot, they shouldn't be going down the road of selling it. Right. And dropping prices. Now, if they needed to sell, what's the good news about that? The good news is, is that the Phoenix market over the last three years had like a 60% appreciation, right? So what if you only capture 45% of it? Guess what? That's still more than a decade of appreciation in three years. And this is why it's so frustrating when you talk to sellers about, well, my neighbor got this in March. Well, we're not in the same market. Right. We're in a different market. But the. I hate saying the word greed, but that's kind of what it is. It's like, okay, so you bought your house in 2018 for 200 grand, and you can only sell it for 380 today, you still netted $180,000. Right. Instead, they're focusing on the negative of the $20,000 they're not getting that their neighbor got six months ago. But those are the sellers that are motivated to get rid of things. Right. So it's still a great market to sell or buy. You just have to understand what you're signing up for. Right. Seller contribution. God, if you ask a seller for a dollar towards anything over the last two years, your contract got rejected. Right. They weren't doing it. They weren't given anything. They wouldn't even fix the bathroom faucet on the way out the door. Right. They'd probably break it because they knew you'd buy it anyway. But seller contribution, we're seeing on average, you know, Kelly, what are you seeing? Like, around 3% in seller contribution pretty regularly right now?

Yeah, I like to equate it to dollars. So, you know, I think anywhere between 10 to $20,000 and seller concessions, depending on the price point. Remember, that's a percentage of the actual purchase price, not the loan amount. So there's all kind things that we can do to help with either, again, a temporary buy down, a permanent buy down on the interest rate, or a buy down together with covering all the closing costs to reduce cash to close. So it's just a whole different market. And it's so amazing to see. It was only March, like you said, that none of that existed. I mean, it was just like night and day. And now we're like, we can get creative and really be able to help people figure out how to best use the money based on their goals.

Right. You know what's really crazy about that, Kelly, is that I remember in 2007 putting a house on the market and we didn't have multiple offers on it. And it's crazy how fast the light switch is flipped up or down. Yeah, right. So like this year, March, everything's going bananas. April, you're like, where'd everybody go? What happened? Right. And nobody had any urgency in April to like, hurry up and lock something up while the interest rates were low because nobody had any expectation that the Feds would do what they're doing with rate hikes. Right. And again, we only know what we know. Right. And so that's why making a decision of what I can qualify now, what are the benefits of it? And like what Kelly's talking about, the seller contribution, you know, there's some other things there that are such critical pieces for buying a home right now because, you know, back in January, let's just say a $400,000 home, you might pay four and a quarter for it. Right. You might have had to pay $20,000 over the appraised value, which was cash out of your pocket. You had to pay your $12,000 in closing costs and lender fees out of your pocket. Plus you had to put that 5 or 10% down. So you might have been coming out of pocket 60, $75,000 to buy that home in January. Well, now the tables have turned and we're able to go through and say the same $400,000 house, but the seller's willing to give you $15,000 in closing costs and which can allow you to either buy the interest rate down, you can use it towards all your closing costs. Like, there's just a ton of different things that makes it beneficial as the buyer right now. Yes. Again, we're focused on the rate, but let me, I'll explain that in the next slide because it kind of shows you the differences because you're also having the ability to create a lot less debt right now, even though the interest rates are higher. Right. So you're going to have a little bit higher payment for right now, but you're also going to have some tax advantages from interest write off. You know, whether you're investing in real estate as far as a rental or you're going through and buying as an owner occupied. Right. Because there's still some tax advantages to owning a house, less debt, Right. So what I was just saying, which is kind of interesting with the next slide, is that your buying power is less. So your payment might be a little bit more right now, but the minute interest rates go down, you can adjust the interest rate. Right. You can refinance, take advantage of it, and then it's going to pull the payment down. But what you can't change is the sales price. Right? So if you bought something for 450 grand last year and your neighbor's house just sold for 400 grand and you picked that up, well, you have $50,000 less debt than the other guy does, but your payment's higher for a short period of time or until interest rates change. Right? Right. So you kind of have to look at that. And that coupled with some of the things Kelly's talking about. There's some programs out there, like a 2:1 buy down, that we can use seller concessions to actually get that payment more. More well rounded for you in. In that aspect. More homes to choose from. I think there's a lot of buyers out there that bought things just because they felt like they had to over the last couple of years, because that's what they won in their offer and they kind of got stuck with it. So I think some people you might see with a little bit of buyer's remorse, you know, but payment wise, they're probably super happy about it, right? I know that, you know, my primary homes at 2.9%. I'm super happy with my mortgage payment on the house that we live in right now. And I'm glad we did what we did. Right. I'm not super happy about my investments right now as far as the investment side, because it's hard to cash flow on an investment property right now with where the rates are. But as an investor, can you buy a better deal, have more motivation, have some seller contribution? And are you planning on something for the long run rather than the short term? Right. And that is one of those things that's important. And then sellers willing to make repairs, right? This is the most annoying part of being a seller in this market is now we've got to deal with repairs, right? So we got to send people out, we got to do all the things, and it's a total pain in the ass, but they're willing to do, to keep a deal together because they're like, I have the golden goose. They wrote a contract on my house, and I want to keep this person happy. And so, you know, as. As your agent, you know, or whatever agent you have, we need to be a little bit more bulls in a china shop with the sellers, right? I don't like it when I'm on the selling side, but I do know and I do empathize with the buyer's agents of what they're doing, because it's the same information I would tell my buyers, like, let's just ask them for everything, right? And then see what happens, right. The worst case scenario, they can say no. The best case scenario, they can say, yes, we'll do everything you asked for. Right? And that is what's happening right now. So those are like the major advantages of being a buyer, is that you are now in control, right? You're in control of negotiations. You're in control of the choices you're in control of, Hey, I was looking at three different houses. I really like yours, but this is the most I'm willing to pay for it. If you don't want to accept that, then I'll move on to the next thing. Right? So now you're back in control of it. And it makes people think, like, maybe I should take that and move on. And if I don't, Right? So it becomes a game. And it's a fun game when you're a buyer. Now, it wasn't a fun game a year ago. The seller is not so much. But I will tell you this. The sellers have plenty of meat on the bone. They'll get over it, right? If they truly want to sell their house, they've had a lot of appreciation, they've had a lot of things, and you know, they'll get over it, right? And if they don't, they may be sitting on the house for a while. All right, this is kind of the crazy thing when we look at it, when you start looking at affordability. So I took the medium rent price. So I don't know if any of you here are renting a home. Currently, the average home in the portfolio that I own of 90 homes is about $2,300 a month in rent. Right? So what can you afford in a PIT TI payment, which is principal, interest, taxes, and insurance for 2,300 bucks a month? What's your buying power? So I did all these based on 5% down. And you can see, you know, the different percentages. So the one on your left or my left, whichever one it is, it's at 6.25%, right? So at 0 down, you can qualify for a $300,000 house, 20% down. A $400,000 house, right. A year ago. Look at how much buying power difference, $100,000 with the interest rates, you know, when they went up three points, right? So now I want you to think about this. Could it get worse before it gets better? You know that the interest rates are six and a half right now. Okay? What if they went to nine? Do you know what your qualifying power is? Then you can buy a $200,000 house. And we don't have any of those. Right. And we probably won't. So it's understanding, like, what do I have right now? So here's what I want to get to point wise with this. Let's say you have 10% down. You can qualify for something right now, but it's not your ideal House. Well, let's take the emotion out of it. This is, this is where I love to go with my buyers. Right? First round, you're buying your first home. You are technically buying your first rental property that you were going to rent from yourself and you're going to keep. Right? We're not talking about selling it, we're not talking about the appreciation, we're not talking about any of those things. We're talking about your future. Right. So we set a strategy in motion to look at, hey, have you thought about, you might be in your 20s, maybe even your early 30s, have you thought about some passive income in your 50s or 60s? And how do we get there? Right. There's only two great ways to get there. One, you can keep saving a bunch of money and putting into the stock market your 401k, whatever that looks like. And then you're at the market's mercy of what happens to your retirement, up or down, Right. I know my father in law, this year he lost 20% of his retirement, right. That is a big hit the year he's going to retire, right. If he would have retired a year ago, he would have had an extra hundred grand. Instead he lost it. Right. So we got to figure out what to do. But if you were to start down the road of hey, I'm going to sacrifice a couple of years and I'm going to go maybe a little further out west, I'm going to have to drive a little bit more to work, whatever the case may be, so that I can go get into a house right now, even though the interest rates are higher, I'm still going to own it. And by the way, this is not my forever home. I plan on keeping it. So then the strategy is the minute the rate starts come down and it makes sense to refinance it, which Kelly, I want to ask you a question on this in just a second is when it makes sense to refinance it as an owner occupied. Let's say, you know, miracle happens and the rates go back down to 4 and you're at 6.25 and you can refinance to 4, right. Your payment goes way down, your debt substantially less than what it could have been. And now that property is potential to keep as a rental for a cash flowing asset for the future. Right. So we're going to keep that, make a plan to go buy another one as you know, a low down payment because it's owner occupied. And if somebody in their 30s did that five times up until their 40s, they potentially would have a two to two and a half million dollar portfolio that would eventually be paid off by the time they're about 60, producing anywhere between 5 and $7,500 a month in passive income with 2 to 3 million dollars of free and clear real estate. Right. There's a lot more to it than that. And this is what I spend a lot of my time doing is getting people to understand the power of owning real estate and what it looks like to keep it. Right. I don't think that any seller that has a 2 or 3% interest rate right now should be selling anything. They should be leasing it out at probably cash flows, all the things, because it's actually cheaper rent than it is buy right now, unless you really look at all the advantages to it with taxes and things. So sometimes there's a sacrifice that we make that says, hey, you know what, I'm okay having this payment and we used to call it drive till they qualify. Right. So you drive until you find that house that meets the budget so you can buy it. But the other question is, hey, if I buy this house, is it going to be a good rental property? Right. So I want to know, does this make a good rental property and what does that look like? Right. And we have a very specific buy box that we coach our clients into of like, hey, if you're going to buy a rental for the future, this is what it looks like. Right? Here's how we reduce long term liabilities. It gets a little more complicated. I'm going to do some more stuff regarding this on how to either convert your primary residence into a rental and buy something else on the next call. We're going to do sometime in January. But again, there's future planning in all this. So Kelly, at what point in time do you suggest? Because we know a lot of people are like, oh, I forget the word right now, but they're constantly refinancing the house. Right. I don't know how many people, they refinance their house like 12 times in the last two years. Right. Which doesn't make sense. But at what point in time does a buyer, if they have a six and a quarter interest rate, at what point in time does it make sense for them to do that refinance? Is it kind of like what we're saying right now, like, oh, we know the rates are 5, go ahead and do it, but what happens? They drop to four. Do they do it again?

Do it again? Yeah, I mean, I think really when you can save 3/4 of a point to one point in interest rate with a refinance, then refinance it, you know, and you want to keep it cost effective because generally what's going to happen is you're going to roll the closing costs back into the loan. But sometimes you're eliminating mortgage insurance, sometimes you're coming out of an FHA loan, going into a conventional loan that would reduce the cost of the mortgage insurance. There's so many different things that happen in refinances. Sometimes you're tapping into some of your equity to be able to pay off high interest credit cards. You know, lots and lots of different types of conversations. So I think, I think when interest rates drop to about a half a point from where you're at, that's a great time just to get it on your radar, all right. And start talking right, to a lender so you can kind of just take a peek. What does a half a point save me? What is three quarters? Save me? What is one? So you know, your threshold. And we have great programs where we can just set up rate triggers into our system and it notifies us based on what's happening in the bond market. Oh, my gosh. Got to call Steve today, right? Because it hit. We're now one point lower and it kind of automates the ability just to get real time information out to our clients.

Right. And keep in mind, you know, when you do do a refinance, you're eating some of your equity. When you're doing. That's what Kelly is talking about, right? You've got some lender costs, you've got some title costs, some other things in there that you're going to eat in some of the equity. Now, that doesn't play a big factor in it. If you're not planning on ever selling the house, right, because you're going to spend a little of that equity, it's going to increase your cash flow. Most people are looking at it like, well, if I refinance, how many years does it take to recapture that five or six thousand dollars to refinance it in monthly payments, right? If you're only going to be there for two years, maybe you don't want to do it. So everything in this is strategy. And so many people on the real estate side of things, what do they do? Right? They're watching the news, they're watching the media. They talk to their friends, they talk to their neighbors. And all those people are giving opinions of something they only do every five to seven years. They really have no knowledge base to actually give you advice they're giving you an opinion on what they did, which might not be the right thing based on the plan and the things that you want to accomplish. Right. So I can see some of my friends on the call here, like Brett, you know, he's a great agent. I've known him a long time. Right. So you get on these, and a lot of my team members are on here. You find people that are truly going to give you advice. And by the way, as a real estate agent, I would never care if you sent me a text, said, hey, I'm thinking about doing this. What's your opinion? Should I? Shouldn't I? Right? It's not a sale. I don't need you to be a sale. I need you to make sure that you've thought through all the things that are happening so that you can make the best decision possible. Right. That's the important part. Right. And again, you don't have to worry about calling me because I'm going to try to sell you something. I'm not. Right. But what I am concerned about is asking you better questions to figure out why you're doing it, who's giving you the advice, what the money looks like. And for you real estate agents that are on here, forgive me for this, but for the general public, 90% of my industry doesn't know how money works. It kills me. Right? So they'll give you advice on things they really don't know anything about because they really haven't done it in their own lives. But they'll sell you and give you the advice that they think based on some other experiences, but not because of what they've actually done. Right. So I spend a lot of time moving money around and working through finances with people because I understand it right. We own a lot of real estate. I've helped a lot of people build big portfolios based on their future strategy and what they want to accomplish in their life, not in mine. Right? That's what's important. Right. The biggest regret I have, and I'm sure, you know, some of my other friends on this call say the same thing. I didn't keep that first house. Right? I should have. I bought it in 99. It would have been paid off by now. It would have doubled in value. But I was 23 when I sold it. I cleared 100 grand. I still don't know what happened to that hundred thousand dollars sounded good at the time. But there's also other pieces of that, like what are the tax ramifications, what are the things I could do with it, all the pieces that go with it. That's where my passion and my focus is now, is how do I help people understand the power of what they own and what they can do with it and what it's going to do for their future. Because too many people, you know, you only have so much money you can put into retirement. So you either have to make some big moves or have some big cash flow or you're planning on somebody to die and you get to inherit a bunch of money or you're playing the lottery. Probably won't work either. Right. So we've got to do some things in that planning piece. Some of it's uncomfortable too. So I'm going to kind of turn this over to Kelly because this is where it gets really interesting in this market, is focusing on what's happening in the lending and understand kind of how the interest rates work and understanding some of the programs that are out there that you can take advantage of right now in order to keep the payment lower. Just because the interest rates are at six and a half doesn't mean you can't do a program that might actually give you a 3% payment rather than a 6% payment. There's some different adjustments. So Kelly, I just, I guess was kind of keep this high level, you know, from what you're seeing a lot of happening right now with those seller contributions and what that looks like.

Yeah. So the program that Steve's talking about is a what we call a temporary buy down. And so what what is really going to happen is the most common One is a 2:1 buy down. Steve, you would be referring to a 3:1 if we're talking rates in the threes. But if today's going rate is 6 and a half percent, here's how it works. On a high level, you have 24 months of lower payments. So the first 12 months of your that you're in the loan, your payment is going to be based on 4 and a half percent, so 2 percentage points lower than the actual note rate. Then the second year your payments are going to be based on 5.5% interest rate. And then the third and final year in that scenario, your payment would be based on the 6.5% interest rate. That does a couple of things. One, it's helping people to kind of have a Runway to the higher interest rate because chances are they're not going to be in that loan for 24 months. They're likely going to refinance out of it. Assuming that they can refinance that's important, but interest rates are going to come back down at some point. It's just historically they go up, they go down, they go up, they go down. So we don't know when best guesstimate is 20, 23, probably second quarter, but you know, we don't know. But so what happens in a two and buy down is that the seller would be contributing roughly two and a quarter percent in closing costs and the lender is going to take that money, they're going to hold it into kind of like a little subsidy account, a little escrow account, and then every month the difference between six and a half percent or the four and a half percent payment, it's funded through that seller contribution to help make up the true payment based on six and a half percent. So it's not like your interest rates really lower, just your payments lower for the first two years in a 2:1 buy down. So that's a great strategy. We're talking with our clients with it. We like to run comparisons too. So is it better to do that with the $10,000, let's say that you're getting in seller credit or is it better just to buy down the interest rate? And that would be a permanent buy down. So maybe the client really isn't concerned about a four and a half percent payment based on and a half percent because they're, they're just don't have a lot of risk or they don't want to risk, you know, not being able to refinance or things like that. So in that scenario we might actually use that money just to buy the interest rate down as far as we can, utilizing that full $10,000. And you know, in that scenario, maybe we're now in the fives on an interest rate. The advantage of using the seller buy down contribution to a permanent buy down as opposed to the temporary one, is that now we can use that interest rate for qualifying. On a temporary buy down, we can't qualify the client at a 4.5% because we, the lender knows it's temporary for 12 months. But on a permanent buy down, let's say we're taking that client maybe from a six and a half percent down to a five and three quarters percent. That can help from an affordability, just kind of like you showed in your chart, it really can help people buy maybe a higher price point, et cetera. So there's a lot of different things that go into which strategy makes sense and which one is best for that particular person. And sometimes it's not really about interest rate, it's about payment and it's just about funds to close. So if somebody's fine with the payment, but they really don't have the funds to close to pay their closing cost and escrow and pounds and all that stuff, then we'll use the seller contribution to cover that. Knowing that when they get ready to refinance, which we will have another refinance, boom, I guarantee it. It's just going to happen. It's just, we just don't know when then, you know, at that point, that's when they pay their closing costs. Because in this purchase scenario, if they're using the $10,000 in our scenario towards closing costs, then essentially the seller paid it. So those are primarily the three types of focal points that we're having and showing strategies with our buyers today.

Kelly, what's your opinion? I've got up here, you know, if somebody's renting, how far out should they start the pre qual process? You know, I think there's, you know, it's kind of a catch 22 in different things, but I think some people are like, well, I'm not quite ready so I'm gonna wait versus getting together and having a strategy session with you. Kind of like what they do with me, which is, hey, I want to have my credit pulled. I want to see if anything needs to be cleaned up. Where do I qualify now? What if the rates go down, right, so that they can start the process. And I see too many buyers like get to the point like all of a sudden they want to buy now something's dinged on their credit. They didn't plan for it, they didn't know how much money they were gonna need. Right. And now they've gotta wait another six months to do it. So what's kind of your process with the buyers on, on that, that piece.

I would say is when somebody thinks that they want to buy a house, get pre qualified, whether you're six months out or a year out for the reasons that you just stated so many times, people are following credit karma, they're following, you know, experience giving them their credit scores. But you have to understand that the scores provided through those types of companies, those are not the same credit scores that a lender is going to pull. When a more a mortgage lender, a home loan lender pulls your credit. It's a different typ algorithm, a different type of scoring model, especially if you think that you're kind of concerned about where your credit is. So I would advocate just talking with a Lender, it's okay that you're six months out or whatever that time frame is and just kind of going through the process. It does a couple of things. One, it's going to give you clarity on do I need to work on these things? What happens if I can work on this and get my credit score up? How does that impact my closing cost? How does that impact my interest rate? And finally, it just kind of helps to give confidence, especially to first time homebuyers because, you know, the home loan process, it's a lot of questions and just a lot of detail and a lot of documentation. So if we can take you through that, then you're kind of like, okay, cool, got that out of the way. I know clearly what I'm ready, what it looks like. And then the lender could just update your credit report, you know, in that time frame that when you are ready to buy. So I think that's one too. I think starting the process, people don't always kind of really realize that, oh, maybe I can buy now. And I'll tell you, this real estate market is going to be a different market in six months. So my question is always, so why are you waiting six months? Why are you waiting a year? Kind of tell me what's going on in your life. Maybe you're in college, maybe you're getting ready to graduate, the big jobs coming, whatever that is, that's okay. But I would say even if you don't want to have your credit pulled, set up a strategy call with my team and our, myself or one of us will just jump on. It's quick. It could be a 10 to 15 minute, kind of like what Steve does. Walk us through it. We're going to ask you some questions and just even based on that information, we can give you guidance on what it might look like. Okay, hey, you're going to need to, you know, set aside this amount of dollars for whatever down payment, closing costs. Hey, you'll have your VA home loan benefits after you've been in the military. Military for, you know, X months. All these things are just, there's so many variables in the home lending process. The sooner you can talk to an expert in home lending, the better that you are going to set up your whole course of the buying process.

Yeah, because I think that, you know, in all the times that, that we've bought houses, right, you kind of start down that process and you figure out, hey, you know, maybe you need to get this credit card down. It'll help your score go up, don't buy a car, right? So you start like really having the plan in place. And what it does is it gives you a goal, right? I know Kelly's really good about like, hey, 90 days, get this stuff knocked out so that then we can come back and revisit this. And if you do these things, this is where it should go, right there. The, the lending business has changed so much since I started because there's all these things that they can kind of test and say, well, if we drop this credit card, you got rid of this car, you did this, your credit score should be this, right? So they can give you a plan that should work based on those, those criteria rather than waiting it out because you could be behind the eight ball. And there's also other strategies to it as well, Right. So when you go through things like right now is maybe you can't qualify on your own, but maybe you have a family member, maybe you have something that's another piece that you just haven't thought of. And we need to talk through to figure out like, what does this look like and can it, is it possible? Right. Is your mom willing to co sign with you, you know, for a short period of time? Right. I would tell you from a standpoint, you know, I was going to go into this for a second for those of you that might have kids that are thinking about buying, right. I would never co sign with them, but I would partner with them to buy it, right? Because we're going to, we're going to look at that, hey, we're going to buy this house, we're going to partner. I'm not putting my name on this without getting 50% equity in it. And we're going to keep it. And then we're going to keep it as a rental property and we're going to start that business together, right? So we start going down that road and we start getting creative with things. One of the things that I think is going to be very interesting, be interesting to see what Kelly thinks about it right now. One of the reports I'm reading right now is just talking about the cohabitation, right? Where you might have multiple families buying a house together in order to offset the cost and the expenses of living, you know, going forward in the future. It's one of the things that I've talked to my kids, my kids are 18 and 20, you know, talking to them about buying homes, which is kind of crazy, right? I think, Kelly, what is it? Somebody's got to make 108 or $116,000 right now to qualify for the medium home price.

Yeah, Yep. Depending on the debt. Right. That's always the factor.

But so if you've got three kids that are 20 years old and they all make 40 grand a year, they can technically qualify for a house.

Absolutely.

They get the benefits of it. They bought their own business, you know, they can keep something for the future. There's a low down payment that they can also. It's having some of those conversations and thinking outside the box of what are the other ways around this. In order to qualify right now, you have to have specific strategy and conversations with everybody. Because I don't know what's worse, buying a house with your spouse or buying a house with your best friend and seeing, you know, who screws that up worse. Right. But. But it's a way to start, right. Not everybody can start in a $450,000 house based on their income and based on interest rates. But can you get a couple of people to do it together? Better than renting? At least you've got some tax advantages and you've got a place to call home and all those other things. And again, you're also looking at the strategy of what's next. Right. So we do this and we get established and the goal for the three kids is to keep the house as a rental property. They put it in LLC down the road, they run the house, they keep it for long term rather than selling it. You know, I think that that's something that a lot of people don't really get a lot of those options or knowledge when they're talking to people because unfortunately the industry is very sales driven. Right. So when you go out or when you do call somebody and you want to sell a home, they're just giving you one option. You know, here's the value, here's the long is going to take. They're not walking you through the strategy of, well, I own my home and you should keep it. Right. That's always my first advice to give to somebody. Unless it's a house that's kind of outside the box. Like, do I think you should keep a 10,000 square foot house? Probably not as a rental. Right. So there's, there's strategies to it, but we want to walk through all those strategies. And that's why I kind of want to do this, you know, the power of buying in 2023, because I do think that there's going to be some advantages to buyers being able to take advantage of this market, even though the rates are high. That is the only negative downside to buying in this market, your payment's going to be a little bit higher. But again, if your strategy is, hey, I want to get into something, it's going to be a future rental property, I really don't give a shit about it right now. I'm going to live in it, I'm going to paint it, I'm going to do some little things to it and then I'm going to keep it as a rental. As soon as I can refinance and get that payment down, I'm going to keep it as a rental and then I'm going to move on to my next thing, right? And if we have that strategy and that game plan, what does your future look like? And I wish, you know, even though that my dad was in the business for a really long time, I wish we would have had more conversations about the long term rather than the short term. He always encouraged me to keep the houses, but I really didn't understand the power of it, right? You keep it, you let it sit, you let it do its thing and I guarantee you it's a better rate of return than any 401k or retirement you could ever invest in. As far as what history has shown right up to this point, real estate has always outperformed in long term. Better than 401ks or better than retirement plans, right. And the other thing too that's kind of crazy about the power of real estate is what your tax benefits are, right? So here's the other piece for those of you that have little kids, right, if your financial advisor is talking to you about a 529B plan, which is a college savings plan, you know, it's, it's, it's pre tax, right? So you're not paying any taxes on the funds you contribute to it for your kids college. Who knows what college is going to cost in 20 years. I hate to think about that. What if you didn't do a 529B plan but the first house you bought is the start of your kids college savings, right? So in 20 years that house is 20 years paid off, it's got equity in it and you can pull cash out of it without any tax consequences and go pay cash for college if you want to, while the tenant still pays off the college tuition, right? And there's no, there's no capital gains, there's no anything from when you sell it. So there's all these different points, but here's, here's the point in all that it starts with that first purchase. It starts with realizing all the advantages that you have in owning real estate and what's possible in the future. Right. There's so many different ways to cut it and so many different variables to look at from different standpoints. And it's all based on the variables in your life, Right. You may not be planning on having kids. Well, cool. It's investment, right? It's retirement. I think that none of us would balk out if we started in our 20s, if we had five houses when we were 50 that were free and clear, spitting off $7,500 a month in passive income that were free and clear. I don't think anybody would balk about that. But nobody talks about it, right? Because what people don't talk about is like, well, if you want to move up, you're gonna have to sell this house, take that equity and go to the next one. Right. And by the way, Dave Ramsey and Susie Orman would totally disagree with me in this because they think it's setting it up for failure with people. But I think there's just a lot of different ways to look at it. And, you know, I can show you the things that we've done with our portfolio. I can show you things that I've done with smaller portfolios. Right. We've got great friends right now that, you know, they took a risk a couple of years ago. Well, they're clients of Kelly's, David and Taylor. They bought their first house after we played a game of dominoes. They've got two little kids. They bought their first one. They kept it as a rental. They moved on to their next one. And we just talked to them the other day. They're moving to Texas now. They're going to keep that one as a rental and go buy something in Texas after they rent. But their net worth has increased by a couple hundred thousand dollars over the last three years because we put a plan in place for them, right? And they understood the plan and they understood the goal. And the goal was, when Malia and Elijah get to be in college, if they decide to go to college, we have these houses that we utilize for this particular thing. And if they don't go, then great, they still have the houses. It's still all the same thing. So real estate is not just about, I want to go buy a house and I want to go nest in it, and I want to make it pretty. Those things are all great. But if you can sacrifice some of that stuff for the future and what it could be, you'd be Amazed at what life might look like in 10 or 15 years. Because you did decide to go down that path with the investment. Because buying real estate, first time home buyer, you own a home, whatever, you are always an investor. You are investing in something. So you should be going into it with a investment mindset, which is, how do I want to make this work for my future? Right? And that's the power of buying something in this market is again, all those five reasons, right? We have more negotiation, we have more, more inventory, there's more repairs being done, and you might get a better deal on something, right? That makes sense for time being. And then when the rates change, you drop the payment, you make it a cash flowing asset and you move on to the next thing. So I want to kind of open this up and see if you guys have any questions or thoughts or opinions or any of that stuff and we'll kind of go from there.

I have a question, Steve.

Yeah.

So what are your thoughts on buying like a duplex or a Triplex or a 4 Plex and you know, occupying one of the units and then renting out the other units? I say this because FHA just announced their new loan limits for 2023 and they increase the single unit to about 530, but the increase all price points. So a lot of people don't realize with FHA it's a three and a half percent down payment. So you could borrow up to a million dollars with an FHA loan on a four unit home and rent out the other three units as long as you're occupying one. I mean, like walk me through, is that even a viable option in the Phoenix metro area? Would you recommend it? Do you want to just focus on single family residences? Tell me what you think.

So I'll give you a couple of things. I love the theory behind it, right? But when you start putting numbers to it, number one, I don't want to live next door to three tenants, right? I would be very like, yeah, I don't want anybody to know that I actually own the building. I'll live here, but I don't live next door to them, right? Because they're knocking on your door all hours of the night. You see what they do. It irritates you, all those things. It's like the worst thing I've ever told anybody to do is, or advise them on is don't buy a rental property on the same block you live on because it'll just irritate the shit out of you all the time, right?

Okay.

So here is the multifamily thing, number one, it is an awesome theory, right. The bad part about it is in Phoenix in general, stop building multifamily a long time ago, right? So a lot of the multifamily, you know, some of it's in some of the gentrification areas, right? With downtown Phoenix, where things are coming up South Scottsdale. But they're also very expensive. I think the last fourplex I looked at in South Scottsdale was like 2 million bucks, which is $500,000 a door. It doesn't pencil out. And here's, here's what a lot of people think. And this is like strategy wise, it's kind of interesting. So let's just take your million dollar four plex, right? Yes, you can buy it. FHA. Those are all awesome. You're paying $250,000 a door, right? You still have four air conditionings, you still have four water heaters, you still have four kitchens, you still have eight bathrooms. You're not saving anything except for the coverage on the roof and the paint on the exterior of the building, right? Now if that fourplex was a hundred thousand dollars a unit, it'd be a totally different story. But is it going to be the area you want to live in? Right, right. That's, that's kind of the question now where this probably works the best is if you had. So here's a great idea, right? I recently looked at one at near Grand Canyon University, right? 35th Avenue, Camelback Fourplex for 560 grand, right? Now if my son was going to Grand Canyon, I'd be like, dude, FHA loan on this. I'm gonna co sign with you. We're gonna buy all four units. You're gonna live in one while you're in college and you are going to help me fill the other three and you're gonna help me run this business right? Now if you are a college parent, that is a phenomenal idea. Rather than paying dorms and all that other stuff, it's a phenomenal investment. You also have the ability to make your kid figure it out, right? Like you're getting this. And part of it is you're gonna help me run the business, keep it rented, watch the repairs, watch over it, right? Because you have that live in tenant. So that's a great investment strategy for those that are like, hey, I think my kid's going to go to college at ASU in three years. Maybe you should start looking at something like that, right? So there's definitely. I love the fourplex thing when it makes sense. Or like in our case, we're actually getting ready to build some four plexes. Right. So we're going to build those and keep those from that standpoint.

Yeah. So I think just a couple things to remember. In that scenario, FHA is an owner occupied type of loan. So in your student scenario, your student would have to be on the home loan. They would be the primary borrower. The parents could be on as co borrowers because we would need them on for their income. And when we think about what does that really look like? Ideally the student has a credit score. So you know, Once they turn 18, they can start working on, you can put them on as an authorized user, but before 18, but after 18 they can actually start to apply and get their own credit, do a secured credit card, that type of thing. They'll be on the map with regard to a credit score and then that just helps kind of the overall qualifying. But if they don't have a credit score, it's not that big of a deal with fha. So you know, again, just kind of knowing that it is though owner occupied type of loan. So somebody on the loan has to occupy for 12 months. After that they can decide not to live there any longer and rent out that unit.

Yeah, and that's, that's one of the great things, again with strategy, if you, if you see and understand the future, there's a plan laid out and there's certain plans that have to be put in place. When you're buying something owner occupied and you're going to keep it as a rental. Right. So let's say you live in it for 12 months and all of a sudden the rates go down. You want to refinance an owner occupied. Well, you can't refinance an owner occupied and three months later go buy another owner occupied property. Right. It doesn't work. There's a seasoning process that we have to go through in order to do that. And that's why there's a strategy behind it. Right. Which is about a two year strategy. You buy it, you live in it for 12 months, you refinance an owner occupied because again, you're getting the better rate and if you've got equity in it, it's going to reduce. It could take away your mortgage insurance. For those of you who don't know, you know, if you don't put 20% down, you're going to have mortgage insurance which increases your payment a little bit. And mortgage insurance is dependent on how much you're putting down. Right. It's higher at 5%, lower at 10%, lower at 15%. So it's not always the same. So that, that is one of those things that when you are going down this road of hey, I want to invest, I'm going to buy things owner occupied and I'm going to house jump. The benefit to that also when you do that is that it's the lowest amount of money to put down, right? So I'll give you a really, really cool example that I ran. If you bought a house 2017, the medium home price across the country was like 235, right? Put 3% down on 235 over the last five years. Average across the country was about 50% increase in value over that five years, right? It was like $131,000. Keep in mind the rate of return, you put $7,500 down 2017 and you got $131,000 in return in equity over that five year period of time. If you put $7,500 and you are super lucky into some sort of stock in 2017, I doubt that you would have hit that $131,000 in gain, right? Unless you got lucky with Bitcoin or whatever it is. And if you got out of it when you could have, right. Or you, God forbid, invested in ftx. So my point is, is real estate is one of those things where it's the lowest entry into investing, if you have that mindset, right? Because what do you get the advantages of if I buy a $400,000 house with 3% down, $12,000 now, and that house increases 6% next year, you got a rate of return, you put 12,000 down, you got $24,000 back in equity over a year, right? It's like a 60% return on cash. On cash. This is what I'm talking about, understanding how money moves and breathes and most people don't understand it, is that if I keep putting these little amounts down and I'm getting the appreciation of the house and somebody else is paying it off, here's all my advantages, right? And we haven't even gone into the tax advantage of owning rentals between depreciation and some of the other things, you know, that happen, and I'm going to put a spin on this, is that one of the reasons I'm so passionate about people understanding this is that, you know, my dad passed at 63. He was real estate for 40 years. His focus was always on making money by helping people, which was great, but he was helping People buy and sell houses, but not helping people understand the legacy aspect of owning real estate, right? So my goal, my dad passed as I looked around was I want to break the generational chains of my family and what it's going to look like for my kids and what their inheritance is going to be and what my legacy is going to look like when I do pass, right? So if you think about all of your families and all your generations, right. You know, I look at, you know, my mom didn't have a lot of retirement. She got a life insurance policy and that was pretty much it, right. There wasn't any retirement left. Some people, my father in law, he's worked for 40 years as a heavy duty diesel mechanic. And you know what he has at the end of it, he's got $400,000 into retirement. That's what he's supposed to live off of for the next, what, 30 years. Well, I'm probably going to be pitching in on that, right? I think we all have parents or siblings that we're going to have to pitch in on because there just wasn't other things done because that's all the previous generation was taught was just save some money in your 401k and that's what you're going to have to learn to live on between Social Security and the government and what you put away, right? And so I wanted to make sure not only for myself but for my agents, for the agent community, for my own kids, that people really understood the power of what we do and the benefits of it and what you're leaving, right? It doesn't have to be massive, it could be a couple of houses. Your goal could be leave one house per kid. If you have 12 kids, sorry, that's your problem. You know what causes that, right? But my point is, is that you go through it and figure out like what I'm doing in my 20s or my 30s, how is it going to impact my kids and my kids kids, right? What's the legacy I'm building and what am I willing to sacrifice to get there? And I think that that's the important part of it is that real estate is not just buying or selling a house. There's so much more to it. There's so many benefits to it. And that's my goal. That's my goal. You know, our company, it's a mindset that I have, right? The word limitless is tattooed on my forearm. It's tattooed on my kids. I didn't tattoo it on them, they did it themselves. And My wife. Right. Because we all live in that mindset that real estate has limitless possibilities in what we can do and what it can potentially generate for the future. If you just understand it and you take a step back and realize it's not just a house. Right. It's not your home. It's something that is, you know, paying into the future for, you know, your family, your kids, your dogs, whatever your inheritance is that you're leaving behind. That's the goal behind it. So anybody have any questions or scenarios? Like, if you've got a scenario and you run around past, I would love to hear it. Right? If you're like, hey, I own a house here, it's this, you know, should I keep it? What does it look like? What's your advice? I'm. I'm all ears. Always where it gets awkward.

Hi, Mr. Steve, this is Vero. How are you doing tonight?

Good. How are you?

Pretty good. Thank you for, for this awesome class. I mean, it's. It is a lot of information. So thanks. And I do have a question. So I am a real estate agent and what. I. I just left my. Well, a year ago, I left my W2 job for 16 years. And I do have some money put aside what I did here.

Hold on.

I'm sorry. I was multitasking here, trying to. So what I did is I was in the school district and basically hearing all of you guys over and over for the last eight months or so, I decided to look into my 401k. Well, it's not a 401k. It's 257, I believe. So once I went into the Arizona retirement, like, website, it looked like I was only going to make 500amonth in retirement. So what I did is I noticed that things were changing. And I wish I would have called you earlier, but I didn't get advice. But I pulled the money and I paid the penalty. So my money now is sitting in a savings account. Because I really, I mean, I. I hear all of you guys, but it is overwhelming and scary to just think like, that's all that I have. I just turned 49 a couple days ago and I'm thinking, happy birthday. Thank you. Now I'm thinking like, okay, what do I do next? Do I get rid of my debt or. I do have this house right here and I know I have some equity here, and I do have a rental property, and I know I have some equity there, but I'm just afraid to make more moves because I'm still so young and naive. To this industry and making crazy decisions. It's scary. I mean, to me, it looks like a scary decision, but you guys make it seem so flawless because you guys already went through all of this and all these emotions that I'm going through.

Okay? So first of all, Veronica, it's still scary to this day. No matter how many houses I've owned or bought or done, it's still scary, right? They just have bigger zeros on the end of them. Scary, right?

Yes.

So you have to start somewhere in that, but you also have to be smart. You know, if you, if you constantly live in fear of. This is all I have. That's all it ever will be. And by the way, with inflation, everything else, it's absolutely. Actually, even though you have $200,000 in the bank, it's actually going down every year. Right. Because it's not working. Right. So you, you look at some things from a couple of different standpoints. You know, I. I recently got a text from an investor the other day. I didn't sell him the house or anything. He saw one of my other houses, like, hey, I'm willing to dump this house to stop the bleed. I'm like, oh. I'm like, well, how'd it go? He's like, well, I'm kind of a dumb ass. He's like, I saw everybody flipping houses, and I'm just a family guy, so I put some money into it, and now the money that I had in savings is all gone based on selling this house. Do you know what his problem was? He didn't go and seek advice or counsel or invest in himself in order to make sure that he didn't make those mistakes. Right. And I think we're always even. As much coaching as I've paid for over the years, I still made mistakes, but I guarantee you I made less of them. Right? So whenever somebody's like, like in your case, retirement, it's the age old fight I had with my dad, and it's something that my wife and I agree on now, is that if we invest into something, let's say it's a business, let's say it's a house, it's got to be money that we can afford to lose. Okay?

Money we can afford to, or you.

Have a time frame to shut it down. Like, I'm willing to invest $50,000 into this venture, but once that 50 grand is up and it doesn't do what it's supposed to do, I'm out. I'm gonna cut my losses and run. Right. I held on to too many companies in my 20s that totally financially ruined us in that 2008 timeframe. So, you know. So are you doing real estate full time now?

Yes, I'm doing real estate full time now.

Okay. On. Well, congrats on that.

Thank you.

Welcome to hell. Right? Here's the good news. Here's what I want to encourage you, though, okay. You are getting in to the market in one of the toughest markets that we've had in over a decade. But here's what I'll tell you. It's the absolute best time to learn it when it's the hardest. Because if you would have gotten into it three years ago, you'd be like, yeah, this is easy. And next thing you know, you're buying a Lamborghini and now you're broke. Right? But the toughest, greatest agents in our market were cut from the cloth of 2008. Okay, I was in it before 2008. But if you look at some of the biggest names in the industry in Phoenix and you go back to what we were doing in 2008, you know, we all sucked at what we were doing, right. We were barely making it, but we were making it. But we ground really, really hard during that time, and it made us who we were because we were survived those times. So I would encourage you that even though this seems hard for anybody else that's in real estate here, this market is not going to get easier over the next year. But I can tell you what's going to get better. The more people that drop like flies, the more business there is, right?

Yes.

And you just have to be the last one standing, right. So, you know, your goal is to be that resource, you know, for your clients, for people. Put yourself out there. You're going to have to do the hard things. That's what a lot of real estate agents have not had to do over the last five years, is do the hard things. Right. I don't care if it's sitting open houses every stinking day, right? Because I guarantee you there's more business that comes at an open house than it does in your living room. So, you know, and as far as your retirement goes, there's safe places you can put it, you know, that might get a 3 or 4% rate of return. But, you know, until you're comfortable with what you're willing to invest in, just be careful with it. And there's no, you don't have to jump into something. This is where a lot of people get pressured. And I think this is where you might be a little bit. And I would tell anybody on this call, Veronica, I'm sorry to tell you this advice wise, I would have rolled my 401k out and into what's called a self directed IRA. So at least it would have been out of the stock market and sitting. And then you could have directed that investment into whatever you wanted to do. Right. But instead, this is the unfortunate part, and this is what we see a lot of people do. You probably paid a pretty hefty penalty, which is money that's just gone, right?

Yes.

So, you know, it's a hard lesson to learn, Right. So that lesson's over with. So make sure that you talk to people about it. Hey, I did a really dumb thing because I didn't seek advice, right?

Yep. Trust me, putting my face right here in front of you was not an.

Easy thing to do. But here's the thing. Here's the thing. We learn from those mistakes and we do things different. Right. And sometimes we have mistakes that we make that we don't know the impact we're going to have on somebody else down the road. Right. So we have to keep those things in mind. So the real estate business, you know, no matter where you're at, if you're a real estate agent or not, real estate affords a lot of opportunity to make a lot of money. If you can see opportunities, Right. You know, it's kind of like going back to that quote that I put up there, right? It's not what you see, it's what you don't see. Right. So, you know, whenever I'm dealing with other real estate agents that are bringing me things and deals and properties that they don't know what to do with, it's because they haven't been taught to see it differently. Right. My dad only saw it one way, which is we're trading time for money. Right. He didn't look at, you know, look at the investment opportunity of it. Right. And that's the beautiful thing about real estate. And so, you know, your retirement, you know, you may look at it, you know, depending on what Kelly would say about, you know, qualifying and things like that. But you've got money there and believe it or not, there's going to be crazy stuff that comes out of this market, right? You have some money that you could invest, but I wouldn't go flip houses, Right. That's just risk, risk on top of risk. If you had some money that you had set aside that you found somebody that's willing to do creative financing, which is a whole nother topic. There's going to be a lot of that happens over the next year or so. Right. Those are things where you can put a little bit of money down and end up with a property. Right. I mean you get good at those skill sets and you realize like, oh, this is a totally different thing. Right. So I mean I've had some clients recently where I was able to get into a house with nothing down. The seller carried the whole note at 6%. Right.

That's awesome.

But it's, it's conversations and it's knowledge. So, you know, I, I would tell you with some of your retirement, I would truly think about what are you going to invest in yourself and then figure out how to make that investment work. Because your greatest return on investment is going to be on you no matter what. Because once, once you're smart about it, then it's really easy to go through and make those, those better financial decisions and investments because you've invested in yourself.

Okay, thank you, sir.

Oh, Ed asks, what is, what is your suggestion about buying a pre built 3 bedroom home vs building a new 1 or 2 family home? A couple of things there, Ed. I actually just recently did this. It's actually been kind of cool. I'm kind of excited about finishing the process of it. We bought a vacant lot. I think it's great. And you're probably, I'm assuming you're probably talking about like a manufactured home. Right. The cool thing about the manufactured homes is they are so well built nowadays and you can't even tell that they're not built on site for the most part, except for the seams. I can tell you that we ordered one a couple of months ago, it gets delivered I think in January. It was a great way to create a rental property or a first time home is that we paid $48,000 for the lot, $10,000 in pad prep and the pre built home was $120,000 delivered for a 1400 square foot three bedroom, two bath. Right. And when you're doing that, you can get it to where they lay it on, you know, the affixed foundation which needs to be, you know, ask Kelly. Right. In order for it to be financeable. So it is a great way to build some equity if you can do that. I've seen some people do it where you know, like, you know, here's a scenario I've seen some people buy a five acre parcel in Buckeye or in Whitman and they chop it up into four lots. They put their first home on It. They live in it. Then they put a next home on the next lot and they go move into that one, they keep that one as a rental. So there are some great strategies when it comes down to the prefab homes. So I hope that answers that question for you. Garrett's like pointing here. Yeah. So that's. There's two things. So what Ed's asking is, you know, what's kind of my buy box, right? From a house, from a standpoint, I don't buy rental properties just to buy houses. There's very specific strategies to them. So there's two ways to look at it. Like, in the current market, I'm looking for the deepest discount possible, right? So I want to find somebody that's super motivated. And what's more important is being prepared when that opportunity comes. It's kind of like talking to Kelly, right? Are you prepared with your loan? Do you have your stuff ready? Is all that stuff set in the investment space? It's being prepared for opportunity. So do you have financing in place? Do you have a hard money lender? Do you have something? Because here's what happens. Somebody's going to call, you're going to be having coffee with somebody at work, and they're go, oh, I just inherited my mom's house. She was a hoarder. I don't know what to do with all this. What do I do with it? You're like, hey, I'm a buyer, right? But most of us don't think that way. Like, well, I don't have the money and I don't have any resources to do this. And you just pass it off, right? And you just walk by the opportunity. Like, then you find out a week later the guy sold it to somebody like me for 100 grand. You're like, I would have bought that. Like, yeah, you could have, right? It's about the mental preparedness. So, Ed, to answer your question, it's yes. Most of the properties that we own is probably in that. I think my average Property is about 250,000. You know, as far as what we paid for it, we've got some higher, some lower. When you invest in real estate, though, like, with the market changing, it's going to be a law of average, right? So I bought my first rental property that we still own in 2015 for 100 grand, right? I've also bought some $600,000 houses. They're in different markets, right? We've got some in Muns park, and we've got some in South Scottsdale. So they're a little bit more expensive, but it's the law of average. Right. Some of them feed each other. So there's not really a specific buy box to the price range as more as does it make sense? And here's what I mean, Ed, is that there are some houses that run negative on a monthly basis as rent, but I bought a really good deal. So if I'm trading $300 negative a month, but I bought the house at 60 cents on the dollar, it's a pretty good trade. Right? That's why the numbers, it really depends if I'm just going out to buy a house. To buy a house. Yeah. I want to stay somewhere in that 250 to 300 range, if you can find it. Right. And then I'm also, you know, very clear on what we buy. Right. I don't own things with pools, single AC units typically, you know, my portfolio is all inside like the loop. So inside the 10151 areas. Because the demographics, right. It's more of a blue collar demographic and it's also people that stay in the homes a lot longer. Right. And we did a lot of data digging through that, through the property management company in order to find what made the ideal rental. And right now it's really tough. Right? You buy a $400,000 house, today's interest rates, you're not cash flowing. Right. That's why it's got to be a really good deal in order to buy something. And again, that's where taking advantage of the current market with the seller motivation, you know, you go find somebody that's like, hey, I just remodeled the house and I'm going to take a hundred thousand dollar loss because I want to get out of this. Well, you're getting the best of both worlds, but you're going to have to stomach that little bit of negative cash flow for a little while until you can refinance. All right, well, if there's no more questions, Kelly, where, where can they find you? Like your YouTube channel is awesome. If you guys want to see some awesome education. Kelly is a lender, rockstar on YouTube. Lots of great information. I'm still way behind on that. She's been harping on me for years for that. So I'm working on it. And then Kelly, what's your website? You're muted.

It's just kelly's@little group.com and if you want to follow me on YouTube it is, you can go to Mortgage, how do I com? So mortgage, how do I com? It'll take you straight to our YouTube channel. And then I have another YouTube channel, Kelly on YouTube. So the content's a little bit different between the YouTube channels, but I'm really just passionate about help helping people with the education part of the home loan process. There's so many myths out there, so that's why I do it. And you, yes, Steve, it's time for you to get with the program.

I know, I know. I will have an email that'll go out to everybody that was registered on the call as well, that'll have all Kelly's information, my information, so that if there's anything that you need or want to reach out, you can follow my shenanigans on Facebook or Instagram. It's not all real estate. I do things a little bit different and a little bit off the cuff, but that's what I enjoy doing. So you will see guns, monster trucks, fast cars, and some houses here and there. So. But I appreciate you all spending the time tonight and if this was useful, you know, would love just some comments or some social share on this, I would greatly appreciate it. And any takeaways will be awesome as well because it kind of helps me prepare for the next thing and. And what I want to do for everybody. So thank you all for being here. I appreciate you and have an amazing night.

Bye, everybody.

See ya.