Transcript - Money Tree Investing Podcast with Linda P. Jones (Part 2)
LJ: Welcome back to the roundtable part of the Money Tree podcast show. I’m Linda P. Jones from Be Wealthy and Smart. And on deck today we have Miranda Marquit from Planting Money Seeds. Hi Miranda.
MIRANDA MARQUIT: Hi, how are you?
LJ: Good, welcome back.
MM: I was bummed to miss last week. But you know, crisis, crisis.
LJ: And you were in New York watching Hamilton, the show.
LJ: Give us the short report on that.
MM: It was amazing.
LJ: [simultaneous talking] crisis?
MM: It was really good. No, well the crisis was that I left my tickets in Philly and so I had to get up early and catch the train back to Philly, get the tickets and then get back all in time for a matinee show. It was quite the adventure.
LJ: But you did it.
MM: But I did it and we got to watch Hamilton and it was amazing and they’re touring – you know they’re going to be doing a national tour in 2017 and I’m already scheming on how I can get tickets when they come near my town.
LJ: Awesome. That sounds good. And we have Doug Goldstein from Goldstein on Gelt.
DOUG GOLDSTEIN: Hey, how are you all doing? I’m actually visiting Pittsburgh right now, hanging out in my sister’s hot tub as I do this recording.
LJ: We got you stateside here instead of in Israel. That’s pretty cool.
DG: It’s beautiful.
LJ: How long are you here?
DG: About 2 weeks,
LJ: Oh nice, awesome.
JOE SELSI(?): Wait a minute, you're taping from the hot tub?
DG: I’m in the hot tub. Can you hear the gurgling? I’m using a filter to make the sound --- do you want to hear it? But, it’s awesome, I’m very relaxed.
JS: This is so uncomfortable.
LJ: We live charmed lives, I must say.
DG: Don’t worry, I’m wearing a bathing suit, so…
LJ: Oh, the visual… Okay. And we have Joe Selsi, hi, from Stacking Benjamins.
JOE SELSI: I am currently in my speedo (all laughing) and sitting in my mom’s basement.
MM(?) Okay, so I would rather picture Doug in his speedo than you in a speedo. This is where I’m at right now.
LJ: Oh my gosh. Oh this is not good. Okay. We better get started. So we’re talking about real estate today, and you know I just – it was very eye-opening to hear from Jules some of his experiences. But I know that we all have some experiences in real estate. Have you ever had an inspection go wrong, Miranda, when looking at real estate or buying real estate?
MM: No, I have not. But when we did buy the house that we bought in Utah, we did have an home inspection come, but the house was being built at the time and so we were a little bit nervous because you know how it is, right? Contractors are behind schedule all the time. So we were a little nervous because we had the home inspection scheduled and we wanted to buy it, we were going to buy it from the builder but the builder was behind schedule. And so we were worried that it would push back everything because would they be ready. But it turned out that we just rescheduled the home inspection. So we worried a lot over nothing.
LJ: Well, you know, it’s very stressful to buy a home as you know…
MM: It is, it is.
LJ: One of the most stressful things people can do and it’s one of the largest purchases they’re going to make so it’s normal that people would feel a lot of stress and a lot of worry over things.
MM: Right, and then you have to turn around and try and sell it and that’s stressful too.
LJ: Exactly. How about you, Doug, have you ever had a bad experience with a home inspection?
DG: Well I tried to get this guy, Inspector Clouseau, and …
LJ: Are we on the right show? I think we’re on [simultaneous talking] _00:21:15_ today.
DG: You know that song, the band is totally skipping my mind but it goes I had accountants pay for it all.
LJ: Oh, yeah.
DG: Life’s been good to me so far.
LJ: Yes, I know that one.
MM: It’s not a band, it’s Joe Walsh. He was formerly of the Eagles but that was one of his solo things.
DG: I thought it was Baby Got Back but I was wrong.
LJ: Are you just gloating about being in the hot tub or what?
DG: I think I just want to sing for you but no, there’s a lesson behind this.
LJ: I would just like to point out that I’m am the youngest person here and I knew that (laughter).
DG: That is awesome, and had I been faster at Googling it I could have found…..
JS: Welcome to the [inaudible] _00:22:03_ trivia podcast, my name is Joe.
MM: [inaudible phrase] because this is the music I grew up with.
LJ: Okay, Doug, what is your point.
DG: But what I wanted to say about that was, is that you guys are like super experienced real estate dealers, but not that I haven’t bought a few properties in my life but based on the principle of that song, I have lawyers handle it all and I know it costs more money but I always just turned over everything to my lawyer and said okay, you do everything, which he did, and charged me for it, and I wasn’t involved in the stuff. But it always worked out okay. And my fear is that if you don’t have professionals handle it for you, you’ll get wiped out.
LJ: Well you know, it’s a very interesting point you bring up, and that’s what Jules Haas says really happens in New York City is that they turn it over to the attorneys which is really interesting because it’s very different out West, but I think some places that’s required and advisable, so good for you.
DG: You know what it is, it’s just seriously, you don’t know what’s going on and it’s so complicated. Everyone says well you just buy a property and either live there or rent it out. Nothing is easy. I hate when people always tell me, well just do this. Hey [inaudible] you're running a big business, why don’t you JUST do this. It’s like do you have any idea how to JUST do something? People always say that to you when they DON’T run their own businesses. But that’s how I feel about real estate, it’s not my expertise so I have someone who really knows what he’s doing do it.
LJ: And how about you, Joe, ever had a bad experience with an inspection?
JS: You know, the worst inspection that I’ve ever had was for this current house that I live in and it’s funny because I totally agree with what Jules said when I would talk to clients about their inspections or even with mine, you really want to walk through the house with them – not just because you can ask questions but also because I’ve found that they will give you a lot more information. A lot of the stuff that doesn’t make their report is still great stuff for a brand new homeowner to know. And so it was a double whammy because I was in Michigan and this house is in Texas, and so the house was inspected at a time when I couldn’t be here and to expedite the transaction I just had them do it. And I found a few things that the inspector missed, but then I think that the inspector might NOT have missed them, he just might not have thought it was important enough to put in the full report. So I really like Jules’ recommendation to walk the house with them. It’ll also give you ideas for what the maintenance and upkeep are going to be. Because they’ve walked through a bunch of different houses and they can tell you you know if they think that the heating and cooling costs are going to be higher, as an example. Or what the first upgrade to the house should be in their, you know, in their mind, what the first things to fail might be. They’ll tell you all those things and those generally might or might not go in the inspection report.
LJ: Yeah. I think that’s a great point. Sometimes when you ARE out of state that’s a problem and that’s what happened to me. I was in Washington and buying a home in California and the inspector went through it and then later after I purchased it and moved in we found mold, and we had to do…
JS: Uh oh.
LJ: Yeah. And we had to the whole mold abatement and fortunately it wasn’t a huge expensive thing but he completely missed it under the guest bathroom sink.
LJ: … it was the strangest thing. It was yeah, and so I kind of don’t have any idea how he missed it but he did. So that happens.
DG: Can I ask you a question? If you buy a place, let’s say that situation, does your homeowner’s insurance kick in the moment you buy it or do they exclude pre-existing problems?
LJ: It’s my understanding they usually exclude pre-existing problems. So the home owners wouldn’t cover it but what we did was we went back to the inspector and said hey, come look at this, this is what you missed, and negotiated with the realtor how to cover – basically refund his fee and then you know we looked at what it would cost to fix it and it wasn’t that bad so we all worked it out together, but.. it wasn’t a fun thing, it was very scary, you know, because you hear about mold and you think six figures, immediately, that usually it can (cost) _00:25:56_ to try to correct that so it was scary. But it was fine, worked out okay, it wasn’t anywhere near that cost. Has anyone had a bad experience buying real estate? Doug have you ever had a bad experience?
DG: I almost had a bad experience, but I’ll tell you what my lawyer did. Because it was a really good lesson. We were, we’d decided on a deal, we’d shaken hands, we were ready to roll and (just) the money hadn’t finished up and the buy- we were selling the property – and the buyer, buying from us said, Listen we’re moving [inaudible] _00:26:27_ can we just put some of this stuff in the house, like we’ve already agreed on the terms, we’re all set to go, and would you mind if we just started moving in some of our furniture? They had some perfectly legitimate reason. And it sounded like a perfectly legitimate request. And so I said yeah, let me just – I said work it out with the lawyer because that was my standard answer. And the lawyer said to him absolutely not. You cannot put a single thing into the house until we are totally done with the deal. And I said to my lawyer, I said, god, you're really mean, you know. Why not be nice to these people, it was a friendly transaction, everything was fine. And he said that the moment they put something into the property, that is a sign of ownership and then we have no – we can’t negotiate any more, the deal is done. He said we’re still in the middle of the deal, wait til the deal is over before you let them do anything with the property. So I felt he really saved me on something I didn’t even understand. Yet another example of why you want a professional helping you.
LJ; Um hmm. Miranda, how about you? Any bad experiences?
MM: Well so I’ve only bought one house and sold that house and for the most part one thing that as far as buying real estate and living in it goes, as far as having a mortgage, all of that stuff goes, the whole situation was just, I discovered I like renting better because there’s all these tedious things. After 5 years we had to change the cheap carpet that the builder put in and so that was a cost and by the time we sold the house we were getting to the point where we were starting to need to make other maintenance and repair upgrades to the house and just, you have to take care of the lawn or hire somebody to take care of the lawn. I, I’m a convenience person and so owning this house was just very inconvenient for me. And then of course we bought in September of 2007 so everybody quickly do your math, when did we buy? At this terrible time. And then we sold in September of 2014, almost exactly seven years later. And in the area I lived in it wasn’t a huge, huge difference in the market, and things move slow, so actually the housing market in Logan, Utah didn’t actually get hit until probably right around 2010. So we were like way behind the rest of the country, which means you know Logan hadn’t started recovering when we left. And so we actually ended up having to pay $10,000 to sell the house and get out because we wanted to sell it quickly, we were moving for a job, all of these things. And so just overall, just the general inconvenience of it and everything associated with owning it, while it wasn’t like this horrible experience that ruined my life, it was just, it was just an array of 7 years of inconvenience and things I didn’t want to deal with that I dealt with.
LJ: Yeah, understandable. How about you, Joe.
JS: I guess I’ve been lucky because I haven’t had a bad experience buying a house. Which is funny because on all of my transactions buying properties I’ve always gone in aggressive. I go in aggressive with a low offer. Of course the times when I was buying houses – one time I thought the market was just screaming high and I wasn’t going to pay nearly what they wanted. And the second time the market was, had collapsed and so I thought I could get away with, thought I could get away with a much lower offer. And in both cases I ended up being right. Actually, in all 3 cases I was right. So I think that, I guess even though I don’t have a bad tale to tell, I don’t think there’s anything wrong with being aggressive.
LJ: So is it fair to say life’s been good to you so far? Just kidding. Just had to say that. Sorry, it’ll just go on in my head and I won’t be able to get it out the whole show, but that’s okay.
MM: Well I had kind of a bad experience. I was buying real estate with a group of people, we were buying a foreclosure and we bought it on the courthouse steps and found out that we didn’t have clear title and were scared out of our minds that we had [simultaneous talking] _00:30:22_ all of our money. But we hired a very competent attorney who fixed it and everything worked out okay. Thank goodness.
LJ: How about has anyone ever lost escrow money? Did you lose escrow money on your first purchase, Miranda?
MM: No. Nope, we didn’t lose any escrow money. We didn’t have any problems with escrow. There was a brief period of time where we had put down some, we put down some (earnest? _00:30:48_) money while we were looking at a house and then almost ended up in a bidding war while we were buying the house. We almost ended up in a bidding war with somebody but luckily the terms of the situation were that we had 48 hours. And they called us after 24 and they were like, somebody else is going to buy the house so we’re going to up the price or you’re going to lose your (earnest) money. And we looked at it again and got with our real estate professional. I said wait a minute, this doesn’t sound right we have 48 hours and they can’t just up it after 24. And so we got that down and we managed to get the house at the price we had put in and well, when we accepted their counter offer we went ahead and did that and managed to avoid the bidding war and managed to avoid losing our earnest money so it was nice that it worked out I guess.
LJ: Wow, good job. Yeah. Joe, how about you? Ever lose money in escrow?
JS: No, because I had nothing go wrong I never once lost escrow. And life has been good to me so far.
DG: I see a theme here.
LJ: How about you Doug? Have you ever had a sale fail or lose money in escrow?
DG: No. But I’ll tell you the interesting thing is that when I bought my current residence, my brother and I and our families, we wanted to live next door to each other. So we had a lot of conditions on what we were buying and we told the real estate agent and we put it all on her. Like she was responsible for making the whole deal work out and she had a huge incentive because two deals instead of just one. But it had to work out that both sellers were willing to sell to us at about the same time. So I know this doesn’t answer your questions, but I’m noting once again, not only did we have a good lawyer but we gave the responsibility of making the deal work, of making both deals work to the real estate agent so that ultimately she made sure that we were covered, and wouldn’t end up one of us buying the house and then the other one wasn’t for sale because the other side backed out.
MM: Yeah. I haven’t had a sale fail fortunately and haven’t lost escrow money. I think that would be traumatic to happen on both accounts but been fortunate that they’ve always gone through.
LJ: So Joe, what advice do you have for first time buyers?
JS: I was going to say the big thing there about losing escrow and the way NOT to lose escrow is I think wrapped into doing all of your due diligence first, I think especially for first time home buyers, you're very excited, right? And you think that the house is going to go away because you fell in love with this one, and reminding yourself that this isn’t the only fish in the sea – almost like when my first girlfriend broke up with me. My mom told me this isn’t the only fish, there’s other fish. You gotta say the same thing about houses, that you know what, if we lose this house, it’s much, much better to lose this house than it is to have something go terribly wrong. And I’ve seen people that decide to buy houses as is, they forego the inspection, almost every real estate horror story I’ve ever heard is wrapped in somebody that cut corners. Don’t do that.
LJ: Miranda, how about you?
MM: Yeah, so my advice for the first time home buyer is more along the lines of double check yourself and see if this is what you really want to do. Because remember when you have a mortgage and you're living in the house, it’s not an investment and everybody around you will say this is the biggest investment of your life. No. Unless you're buying property as an investment property and you're planning on renting it out to somebody to get actual income from it, it is not an investment. If you are living in the house – this is my very STRONG opinion by the way – if you're living in the house and paying a mortgage it’s not an investment. And so really think about it and say well why am I buying this house? Does it fit with my life style right now? Am going to want to move? If I want to move and I don’t want to rent it out, do I want to deal with having to sell it? Do I want to deal with the maintenance and the upkeep or pay somebody else to deal with it. Am I prepared to replace the roof in 15 years. I mean, there are all these questions you need to ask yourself and say, does this fit my lifestyle and is it really going to help me meet my other goals in life. Because I think a lot of the time, especially as a first time home buyer, we’re stuck in this road map we’re supposed to follow. We’ve got these milestones we’re supposed to hit and one of those things is buying a house. You're married now, now buy a house and fill it with children. And, and there’s nothing wrong with that path if you want to walk that path. But stop and think about it and ask yourself, DO I want to walk that path and is that really what’s right for me. Just because everybody is telling you you need to buy a house and you're nothing unless you buy a house, it doesn’t make it true.
JS: Did you say check yourself? Was that your advice? Check yourself?
MM: That’s right, check yourself.
JS: Would it be fair to say check yourself before you wreck yourself?
MM: Yes. You should probably do that. Oh gosh. Because that’s what we need is more [inaudible phrase] _00:35:33_ our head.
LJ: Check yourself before you wreck yourself (all laughing). Okay, Doug? What about you, what’s advice for first time home buyers?
DG: I’m going to follow in the line of Miranda’s thinking which is not a bit of financial advice because obviously don’t buy more house than you can afford. But I’m going to go with the do whatever makes your spouse happy and try to care as little as possible yourself because – unless you're the one who’s caring and your spouse doesn’t care. But I can tell you, when we bought our house, in fact the one that we’re living in now, my wife and my brother’s wife, they did all the shopping and they found exactly what they wanted and made the choice, and not that I am suffering or sacrificing, but I just – you know something, if you're happy then we’re all going to be happy and I think it’s very important to realize there IS no such thing as a perfect house. And don’t get your hopes up trying to get something that, that you want so much. Don’t forget that if you're going into this with your spouse, it really is a team thing and generally, develop the personality trait to care a little bit less about the details so that your spouse is happy getting what he or she wants.
LJ: Well not only is that good real estate advice, it good marital advice. Thank you Doug. And I’m going to say, get pre-qualified. Go and get pre-qualified before you buy a house, it’ll save you a lot of headaches to know what you can buy, how much you can afford, that it’s going to go through, that you will have a loan coming. That will save you a lot of heartaches. So be sure to get pre-qualified.
JS: Also, Linda, on that note – because I love that advice, that’s fantastic advice – a lot of times in a very hot market you WILL lose a property at a fair price because the other person was prequalified and you weren’t.
LJ: Yes, true. Because it removes any question of whether – it removes the financing contingency essentially. It’s one less thing that the seller has to worry about. And speaking of sellers, Miranda, what advice do you have for home sellers?
MM: Once again it goes back to figure out your goals. When we sold our house, we ended up, we did have to pay $10,000 to make the deal work because of how much value the home had lost over those 7 years, and due to the fact that we wanted to move quickly. So you need to be clear about your goals and realize the realities of the situation. We wanted to sell quickly so that we could just be done with the house, unload it and move across the country. And so as a result we weren’t able to just sit around and have the house be on the market and wait for a buyer to be excited about the house. We had to just sell and accept what we could get for it and pay the $10,000 that we needed to make the deal happen and move on. Because that was our goal and we didn’t want to be saddled with the house. If you don’t mind being saddled with it, if your goals are different, then you can wait a little bit longer or you can rent it out or you can go through these different scenarios. But you really do need to sit down and say okay, what is my goal here, what do I want to have happen and how will this help me further my other financial and lifestyle goals. And then kind of approach selling from that angle, especially – and you do. You need to realize that if you want it to sell fast, it’s not going to be cheap. You as a seller are going to have to make some concessions, somewhere.
LJ: Doug, what about you? What advice do you have for home sellers?
DG: I think that presumably you're going to be moving somewhere else and you're selling and therefore going to be buying at some point soon. Be aware that there a l to of different ways of funding that transaction. One of them for example to – and probably I think one of the best ones – would be to just get a bridge loan from the bank, which is a type of loan that you do that is designed for this very short term transaction as you're selling one property and buying another. But you may be tempted to do other types of loans which could be really problematic, like borrowing from your 401K which I’m very much against, or you know borrowing from family members who are going to look at you askance if you have any problem paying back. So think about, you know, have a strategy for having the cash flow during the whole transaction and don’t forget that part of the move and the whole transaction is not just the purchase of the property, but it’s going to be actually moving, you know, moving trucks, moving men and boxes, as well as any renovations that you might need to do, which don’t feel you have to do the first day but if you're going to do them, make sure you really build that into the budget for buying the house.
LJ: And Joe, what advice do you have for home sellers?
JS: Stage your house. It’s funny, when we were shopping for houses and even when I was helping clients decide like what was the best strategy around selling their house, just the statistics on staging – people say two things. They say well, that’s a lot of money. Well, the average person gets about 6% more money a recent Coldwell Banker study showed, 6% more money when you stage your house. And then secondly, houses that are staged also sell faster than houses that are not staged. And it kind of makes everything pop. You know the online pictures pop. But also when people come into the place they can feel themselves living at the house. I remember just personally going into so many houses that were either dirty or they had all kinds of like personal knick knacks. It’s hard for somebody to imagine themselves living in that house if it really feels like it belongs to you. And it’s funny because I’ve talked to real estate people that have said, you know, I fight with people because they go, well, this makes it feel more homey. I would listen to the expert, right?
JS: I’d totally listen to the expert and make it look like the Pottery Barn. That’s what people want to buy is the Pottery Barn.
LJ: I think we’ve all walked into a home and had our jaw drop with all the clutter and crazy somethings that people have in their home. And so it’s very distracting. And I think you're right. You have it nicely staged, that makes a huge difference.
DG: Have you hear that people – you know one of the things that people often say is oh I just redid my bathroom, I spent $15,000 and that improved the value of the house. But in fact what I have heard, and maybe you have some evidence for this, is that it’s NOT true. It means that any money you put into your house you don’t get back out when you sell it.
LJ: It depends I think because … people see. What happens is if something isn’t fixed up they’ll walk in and they’ll say cha-ching, chapter-ching, that means I have to put $30,000 into that or $50,000 into the kitchen or whatever. And so they’re thinking, okay, reduce that off the price because that’s what I have to spend to bring it up to current days. So I think if you CAN bring it up to current day for people you're much further ahead and people want move-in condition. So I think it helps it sell faster too.
MM: The studies indicate that you're not going to get a dollar for dollar return in your selling price for the home but like Linda was talking about, there’s some of those non-tangibles. Like it might sell faster. You have buyers more willing to meet your terms. But yeah, there are very few upgrades you can make to your home that provide a dollar for dollar return on your investment. You’re usually going to get something like 60/70 or 80% back out of it. The main exceptions to this rule are if you change your – like upgrade your garage door and your front door. Those actually provide you with a return that ‘s more than what you put into it. But everything else pretty much does not.
LJ: Joe, did you have something to add?
JS: Well yeah, and I’m glad Miranda went first because mine was more on a tangent, which is when I moved out of my first house, we staged everything, we fixed all the little nagging things, we did all kinds of stuff and it was because we knew that some of those the seller might come back with. But secondly, we thought we might get some money back for them. And I know this is a money show, but throw all that stuff in the trash. When we got done with our house, our house looked so awesome I thought why did I never do this crap when I actually lived here and you see people that fix it all up for the next owner. Don’t fix up your house for the next owner. Fix it up for you because you’ve gotta spend a long time there.
JS: So that would be my advice.
MM: I think that’s great advice. My advice is to price it reasonably and with the market because the biggest mistake I see people make when they go to sell is they pull some price out of the air that they would like to get. And if you watch Million Dollar Listing New York or LA which are two of my favorite shows, it happens all the time with any price point. You have to basically pull the comps and see what houses are selling for that have your square footage and are in your neighborhood and then plus or minus the extra things that you have that are better than that house, add more money. The things that are not as good as that house, if you haven’t fixed up or remodeled some of it, subtract that amount, and that’s how you come to your price. And that’s a realistic price that will sell for people. So I would say – I just see too many people come with a pie in the sky number that they want and unless it’s a super hot real estate market which some of those shows had where they were getting multiple offers, that’s a whole different scenario where you can push the price a bit. But if it’s a regular market where you're going to get one offer, then make sure you're pricing it realistically.
LJ; Alright folks, that is all for today. What’s everybody up to? What is Doug up to at Goldstein on Gelt?
DOUG: Well, other than sitting in the hot tub, when I get back I’m going to continue actually working on the course about financial planning. So I’m still open to ideas if people have real life financial planning stories or problems I appreciate when you send them in. Just go to goldsteinongelt.com and send in your real life financial planning stories at the Contact Us button.
LJ; Fabulous. Miranda, what are up to?
MM: I – just trying to get home (laughing) I just want to go home. I’m not doing anything anywhere, I just want to go home.
LJ: You’ve been travelling all summer.
MM: I have. I have got about 2.5 weeks left.
DG: Is that too long a vacation. Are you teaching or something?
MM: Two months is oh my gosh, what was I thinking? So I just want to go home.
JL: Yeah, it’s hard not to have your home under you. You kinda start to feel like you have sea legs or something. Joe, how about you? What’s new with Stacking Benjamins?
JS: So the same hard core stuff we always have on the show. Len Penzo who is one of our contributors on the round table and has an award winning blog, LenPenzo.com – every year he does a – this is super hard core – he does a sandwich survey with back to school, you know, prices and kids going back to school: How big has inflation been on the peanut butter and jelly sandwich versus the bologna sandwich? Where is your best ROI when it comes to the brown bag lunch. THAT’S the hard hitting stuff we cover on Stacking Benjamins and that’s what’s on now.
JL: Okay, I must listen to podcasts.
JL: And at Be Wealthy and Smart we’re talking about what cycles might be low and high right now. So interesting observation of what’s happening out there. And Miranda, do you want to take us home?
MM: I sure do. Make sure you stop by Moneytreepodcast.com to download episodes of the Money Tree podcast and don’t forget to subscribe to us in iTunes and in Stitcher. Also you can use that lovely Contact button at Moneytreepodcast.com to send us your questions. We’ll be doing a listener question episode soon. So please send us your questions and we will do our best to give you I don’t know, our free advice, here on air. And once again remember, no one will take care of your money as well as you do. So invest in your life.