Mitch Florence, VP of Mortgage Lending at Guaranteed Rate, joins Dave and Ryan to talk about post-Covid real estate trends, first home horror stories, and whether TikTok is right about becoming a millionaire through Airbnb.
Mitch Florence and Guaranteed Rate Mortgage are not affiliated with The O.N. Equity Sales Company or O.N. Investment Management Company.
David Smyth and Ryan Petrunyak talk about family, finances and fun. Learn more about Family Financial Partners at familyfinancialpartners.com.
Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. David Smyth is an Investment Advisor Representative offering Investment Advisory services through O.N. Investment Management Company. Estate planning services provided in conjunction with your licensed legal advisor.
Mitch Florence, VP of Mortgage Lending at Guaranteed Rate, joins Dave and Ryan to talk about post-Covid real estate trends, first home horror stories, and whether TikTok is right about becoming a millionaire through Airbnb.
Mitch Florence and Guaranteed Rate Mortgage are not affiliated with The O.N. Equity Sales Company or O.N. Investment Management Company.
David Smyth and Ryan Petrunyak talk about family, finances and fun. Learn more about Family Financial Partners at familyfinancialpartners.com.
Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. David Smyth is an Investment Advisor Representative offering Investment Advisory services through O.N. Investment Management Company. Estate planning services provided in conjunction with your licensed legal advisor.
Sideburns versus skinny jeans, Walkmans versus AirPods, millennial or Gen Xer. We're going to dive right in to family, finances and fun. Mom, is my laundry done? Really? Ryan? Welcome to In My day. Hey everybody. Welcome back to another episode of In My Day with Ryan and Dave. How we doing Dave? Hey, I'm doing great, ryan. I'm just looking forward to the show today. Me too. And today we have another special guest. We have Mitch Florence, who is the VP of Guaranteed Rate Mortgage on with us today. How are you, Mitch? I'm great, gentlemen. Thank you for having me. Absolutely. We appreciate you coming on. This is great. Thank you for coming on. Why don't you just start by telling everybody a little bit about yourself and your background with what you do. Yeah. So Lexingtonian born and raised, which I feel like you don't hear that much anymore. Nobody's actually from right? Like you're from inside the circle. Grew up, I feel like we're, we're like seeing like a unicorn. Yeah. Grew up two miles from here. Wow. Yeah. Hmm. Yeah. Lexingtonian, educational background's actually in finance, and if you caught me what, 2010, I'd have said, I'd have been working with you gentlemen educational backgrounds and finance. So always gravitated towards that kind of financial centric spin on things. Is very much how I view myself in the mortgage world, but no outta college. Started in the banking industry and kind of worked my way around there, and then eventually dipped my toes in the lending world and have been doing that for a number of years now. It appears to me, I mean, not to put you in a box, but it seems like every industry that you've been in is required a bailout. To some extent. I mean, so, so what industry is next? That's what we really wanna know, right? Should we, should we kick you outta the office right now? Like, I mean, we don't want you to impact the financial industry now. Like, there's people on here going, don't mess with my with my stock account. Right, right. You've been around the block though, and seeing a lot of different ways of doing business. Yeah. I mean, and it is kind of crazy to reflect back on that. You know, obviously I was in college during 08, entered the banking industry post 08, so I kind of saw the aftermath of that, saw the rebuilding of that. Now we've all experienced covid and now kind of in the post covid era, and especially in real estate, mortgage and finance, those industries have been drastically impacted and changed multiple times throughout that. We could talk this whole time about just the changes in banking that I saw during my relatively short career. Yeah. Did you ever think you'd see a rate environment where interest rates were jacked up this fast by the Federal Reserve? Probably short answer to that, no. Not in our lifetime, because I mean, probably the most recent precedent of that. Volcker in what, the seventies or eighties? Mm-hmm. So I probably would tell you I never expected to see mortgage 30 or fixed rates in the twos and threes for an extended period of time, which we saw. And now mortgage rates have depending on what metric you're looking at, doubled and tripled in the span of the year Fed fund rates have been increasing now steadily I probably would've told you, I did not expect to see any of that in my career. Yeah. And you know, Ryan, we've talked about you buying a house before. Mm-hmm. Right? And your perspective of like, man, I got a great deal. Yeah. We have clients come in our office all the time for meetings and they're saying the fed raising rates, this quick I wouldn't be surprised if rates get to 12, 13, 14, 17%, because that's what I remember when I was at Ryan's stage of life. Right. And these are our retirees. Yeah. And they're scared that the current inflation that we're seeing right now is just the beginning because they have that memory. Yeah. Right. Where as your generation. I mean, what are your thoughts on inflation? I mean, what you're just thinking like this is kind of like higher than we're used to paying for things? You know, I mean this is really the first time in people my age and even a little bit older than me in our lives, that we've really seen real inflation at all. I mean, there really hasn't been any inflation over two, 3% in our entire lives. So we've had a lot of other issues in our lives. We've had all kinds of stuff going on, but never significant inflation. As far as, Mitch, I'll throw it back to you here. I think all of our viewers are curious about what the future of the mortgage and the housing market's gonna be going forward. But before we get into that, could you just kind of give us a summary of where we're at right now in the mortgage and real estate market? And while you're doing that, I'll warm up your crystal ball here in the corner. Yeah, yeah. So that it's ready to go when you give that vision. Yeah. Oh, I'll preface all of those statements. Make sure we stay compliant as well, right? Absolutely. In all of our respective industries. Gotta stay compliant. But no, I mean frankly, if you look at mortgage volume, mortgage volume is down. Which makes sense, right? Because people gotta remember that mortgage volume is, is based on a number of different loan types. Purchase and refinance, mainly. Refinance volume is all but dead. Just to be. Because of the interest rate increase that we've seen, purchase volume is largely dictated by the inventory, which again is down. So throw a quick number at you year over year. Mortgage purchase applications are down about 35%. Okay. So I would say overall mortgage volumes, down rates if you're just looking at averages, right now you're seeing average 30 year fixed conforming rates somewhere in the mid to upper sixes. So that's kind of a quick snapshot of where we're at. Gotcha. Right now. Gotcha. So Dave, from your perspective, why don't you give the people a little perspective on the financial advisors side of what the real estate and mortgage markets look like right now? Yeah, so, you know, I think this has been a really interesting market study because this is going on 27 years now, 26, 27 years for me you know, as I've waited into this business and earned my licenses and have continued to practice. I never really thought that I would see this kind of real estate boom unfold again in my lifetime. Like I saw previously when I first got in the business. And I just thought it was because people would learn their lesson and this and that, but the pandemic really just kind of surprised. I think everyone, when all of a sudden people thought, I don't need an office to go to I, but I need a home office to work from. And so suddenly you had this just massive demand of people buying places simply because they needed an extra bedroom to turn to an office. Yeah. Or they need an extra basement or an extra large garage so they could create a home gym, just because as things changed, so we had this massive movement that I saw in client families where they were coming in and saying, Hey, you know, I'm gonna take advantage of these low rates and I'm gonna buy a larger house than I normally would need, but it's because it has my home gym. It has my barbecue pit. It has my office for work, for myself and for my wife to work in separate areas of the house. It has maybe an extra bedroom because we've noticed that family members are coming to stay longer than usual because there's a lot of things they have to go through to travel and so we saw this, back in my day we called it the McMansions, right? And, and the McMansions became uncool and everybody wanted to downsize. And then during Covid it was like everybody upsized again to the McMansions. And, and ironically, as everybody upsized to larger houses, everyone's waistlines also got bigger. So I'm not sure if they like biggie size the entire transaction, but I did notice that with all the clients as well. Not all, only some, only some, not all. Be careful there. If you're listening and you don't feel it was you, it probably wasn't you. If you're listening, thinking, maybe he's referring to me, I am. But the thought is, is that we saw a massive movement of people that had just been kind of sitting at home in their real estate, satisfied, and they didn't need any kind of rental and they didn't need any kind of second home or vacation home. Suddenly sitting at home and thinking about things, For some reason, I think one of the coping mechanisms for a lot of people out there was just, I'm going to either get a new house and spend my money redesigning and, and redoing the house, or I need to have a vacation property because if I can't take all these trips to all these other places, I might as well have a place that the grandkids can come to see me or that I can hang out with. Yeah, there was definitely a real shift from, Hey, let's go spend all this money on a fancy vacation to maybe my dream patio is a better option. And we saw that throughout a lot of people. Mitch, what did you see different in the post covid world in the real estate market versus pre covid? Yeah, and you mentioned a few things that I was gonna touch on anyway. So post covid, probably the biggest difference, frankly, is rates, right? Yeah. I mean, during the Covid era, we saw your 30 year fixed mortgage rates with twos and threes in front. which had been unprecedented. So the biggest difference between then and, and now is largely rate related. I mean, just in the last couple of months we were at 20 year mortgage highs, October and November of 2022. You know, we were at 20 year mortgage highs. Some other changes and we were actually talking about this before you got here, Dave, what you were alluding to. That is a huge change that maybe people don't think about and that is kind of the rise of these, what, what we'll call zoom towns or sand havens, right? These people who flocked to certain areas because money was so cheap because real estate was booming. Actually I think now you're starting to see a pullback from that because now post covid coming back to the office, the virtual work environment has changed. And now I think rates and home prices are a little bit unsustainable in some of those areas. So I think you're pulling, seeing some pullback in some of those, again, zoom towns or sand havens. Some of the other things guidelines, mortgage guidelines, we saw probably, again, probably something a lot of people don't think about unless you're in this world, is covid caused a lot of challenges from a lending perspective, especially as it relates to the comfortability behind someone's employment. Thankfully I think you're seeing some of those guidelines roll off now. So not as big of a deal, but that is one difference that I would actually classify as a positive, some of the rollback of some of the Covid era guidelines. You know, one thing I was thinking about post covid too, that we've seen a lot of, and it slightly concerns me, right? I've seen more clients in the last six months decide to purchase their first rental property, decide to purchase their first Airbnb. Mm-hmm. And these are people that have, for the most part, no experience in this. And you know, for those of you that are my friends out there listening and you're like, I've got Airbnbs and I've got rentals, Dave. I'm not talking about about the folks that you've been in this market for a while and have done your homework and know what you're doing, but I'm talking about just, I've seen a lot of people that I don't think they've ever even done a Zillow search, you know? Yeah. Much less. If you wanna just set it at, have you done a Zillow search or not? And the answer is no. But do you want to buy a a 800,000 to a million dollar, you know, $1.5 million piece of property because you think it's only going to go higher. The answer is there's a lot of people out there right now that are taking money because of the market and, and saying, well, the financial markets haven't done so well, because of this little blip we've been in for, really between November 21 and the end of the year, December, right. So, as of this recording since January 1st, the markets are, are significantly higher for the year, but looking through the first quarter, but it surprised me, but it makes sense because if you think about there's a cnn tracker that is out there. I don't know if you guys ever seen it, but it is called the Greed Fear Index. And I can literally look at that. I look at it every day, and it's between zero and a hundred. A zero is extreme fear, right? A hundred is extreme greed, and I can literally look at it every day and I can come in and I know for whatever meetings I'm going into with clients or prospects or whatever calls I'm having or zoom conversations, I pretty much know what the questions are gonna be coming to me within a fairly accurate radius. I can pick, in other words, I can pick which quadrant I'm gonna get that day based on where that gauge is. And so right now, for example, that gauge is at fear. A few weeks ago during the kind of banking crisis that was occurring, that was, that gauge was an extreme fear. That was where we had people calling us, saying, take me out of my bank. I want to move my money to treasuries. I don't care whether it's three months or six months. Just get me. Now at the opposite end. Right. And we also had people during that time saying, I wanna buy gold. I'm like, what? So that's neither a recommendation nor a discouragement to buy or sell gold. Just want you to know that I can't make that. But people actually called me wanting to buy gold who couldn't spell gold. The other side, extreme greed. Right? I really think that's where we're at. In parts of the real estate market because when people look and they say, well, Florida did, like certain parts of Florida did 30% in 2022, or certain parts of, you know, wherever did X percent, and it was significantly more than the returns they saw in their stock portfolio. What they're doing in that is they're assuming that that trend will continue because people want to believe that things in motion stay in continuous motion, whether they're going negatively for them or they're going positively. And the simple example for folks listening that I like to always think of is when I know we're at extreme greed, right? In the stock market to compare it to the real estate market, because I get all kinds of calls from people that say, Hey, I got a buddy with a stock tip. And I'm thinking about putting like five or $10,000 into their tip. What do you think? And I always just shake my head, and I'm Southern, so I say, bless your heart. And I ask them like, where are they're going for vacation that year? And they're like, well, I'm not. Well, where would you go if you had $5,000 to go on vacation? And those, I go to Italy and I'm like, why don't you go to Italy then? Because at least you'll have a happy memory of what you spent your $5,000 on than a memory of, you remember that time my buddy Jim Bob told me to buy X, Y, Z and I torched the money, right? So the thought is that we're not there in the stock market at all. We're at fear, but in the real estate market, I'm still seeing people act as if the real estate market is only going to continue to go higher. Damn the torpedoes damn the higher rates I just gotta get my money in there. Anybody else seeing that kind of thing? I think to pivot back for a second to what you were saying with first time Airbnb and first time rental people, I think a lot of that is psychological too, because we live in a world where you can go on Instagram reels and watch 10 videos in a minute, and of those 10 videos, if your algorithm is aligned the right way, seven of those videos might tell you that it's super easy to make money in real estate and it's passive income and if you have $5,000, clearly you're gonna turn it into a million within two years because it's just so easy to do. And I think it just becomes very ingrained in these people's heads that it's very simple to do. And they see the, all the positive sides of owning real estate and all the positive sides of investing in real estate, which don't get me wrong, there are positive sides to investing in real estate. And there are great, there are great benefits to it. But a lot of times people fall into the trap of, oh, I'm gonna buy a rental property and it's super easy and the toilet's never gonna break and the tenant's always gonna pay on time, and there's never any issues when that's just not the reality. So I think the kind of social media takeover of that world and all the geniuses on social media who sell their $68 class to tell you how easy it is to do this stuff might be part of what's going into all these young people getting involved in that. Mitch, have you seen anything? Yeah. On that side? So probably, probably a few things to unpack there. Here's kind of a financial comparison for you. Everybody's looking for their Game Stop. Right. Yeah. Yeah. I mean, yeah, that's what they're looking for. Instant gratification and yeah, I mean, real estate as an investment, number one, I am an advocate for in certain situations. I say that emphatically. So what we're really questioning here, should everybody be a landlord? We can all agree probably hell no. And yeah, to your point Ryan, there's a lot of information out there. What people fail to recognize with real estate as an investment is to truly make the returns that you see publicized, you have to scale it. Right. And that's what people don't understand. Yeah. Like you're, you're not gonna become a millionaire overnight buying one Airbnb or one rental property. You have to scale that. So again, I am not a fan for the casual investor to put themselves in a financial predicament to try to invest in real estate. I agree with you wholeheartedly. Can it be done? Absolutely. I mean we could all probably name a lot of prolific people who have made great returns on real estate, but they've done it in a certain way, and that's what I encourage people to do is, is set yourself up if you want to invest in real estate to do it in an appropriate manner. And again, going back to the Zoom town or, or Sand Haven you absolutely saw a rise in the short term rental was kind of another kind of blip in there that threw through an extra, kind of caveat that I don't think a lot of people were expecting is the rise of these short term rentals. Which we'll see how that plays out long term to your point. Again, I think some of that's naturally gonna go away, whether through its regulation or whether through its people exiting those markets. Some of that is rate related as well. It's easy to acquire those properties. Cash flow makes a lot more sense when they're, my rate's two, three or 4% than it does at five, six or 7%. So I agree with you. Yeah. Yeah. And it's interesting to see on the other side, I'll tip my hat to a few of my other folks I work with that have built kind of real estate dynasties, if you will. Sure. Right. They've bought houses back in, like the financial wreckage of 09- 10. Right. Even really through 12, right. Where things were just kind of blah. When nobody was buying 'em. Yeah, nobody was buying, right? Yeah. And, and you could go to the courthouse steps and literally like, there might be like six of you and you basically kind of, when they brought up each item, you just kind of winked at somebody and you're like, that's yours. Let me have the next one. And that way there's no competition for those. Yeah. I mean that's literally what was going on back then because it was just, there was so many keys being returned in the mail, right, sure. To, to lenders because people just had never even put, they had zero down in loans and all sorts of things. Right. So we're not in that environment clearly. But what, what is interesting to me is a lot of those guys that I saw buying, then they, they are selling into. And they are significantly cutting back a lot of those rentals that they've had, things that they bought at that time for 20 to 30,000. Sure. A property for just these that are going for a hundred to 140,000 now, or a hundred thousand that are now going for 330,000. You know, and it, it's amazing to see the capital that they have made. But all because of the timeliness of their purchase. Yeah. Just pure timing. Yeah. And I agree with you and I've seen the same thing, you know, very savvy investors unloading portions of their portfolios, whether because they don't want to deal with it or just simply because they, it's time for them to recognize those gains. Yeah. But I think it goes back to that concept that we all preach is, you know, those people held that asset for what a decade. Yeah, so that's what people have to understand is whether you're investing on the equity side, the real estate side, you know, whatever. Largely it's a long term play. Yeah. And people forget about that. Yeah, absolutely. They really do. Especially in the TikTok world. Yeah. Oh, the get rich quick TikTok world is definitely a real thing. No, no. Take it back all the way around to your, on the TikTok topic, we see the best parts that can happen in any industry. Right on, on a TikTok. Mm-hmm. Right. Or a Reel but you know, according to TikTok, everybody owned GameStop and made millions of dollars, so, you know. Correct. And, and yet when I polled all my friends, there was like one person that said, yeah, I made money and sold and most people didn't even buy it apparently. I guess I don't have very savvy friends or something, but I guess you missed out. You're listening and you're my friend. I'm sorry, but he just categorized you, you know. But the but the other side of it is, when you think about the equity markets, for example, we always tell people it is a long term thing. You're planning for your retirement. You're planning for, if you're already retired, you're playing for your cash flow, right? You're taking a long approach and. And, and yeah. The, the s and p 500 right, may double every so often, right? X fill in the blank X number of years. But the caveat of that is that it also may go down 30% the year after you bought it, right? So, so it just all depends on when you get in on the roller coaster ride, if you will. Yeah. And that can make a big difference, but ultimately that long-term approach tends to kind of smooth out. Regardless of when you're getting in the market. Yeah. And I don't think by any means any of us are saying the real estate market's gonna crater or, or crash. It's just had a great run. I agree. A great segue into, you know, you mentioned kind of the word predictions. So one of the predictions that everybody wants you to make is, Hey, is there, is there a bubble or a crash coming. In real estate? My answer is no. I don't see a real estate crash, especially not comparable to oh eight. Right. For a number of reasons. Some of which we've talked about. But you know, you had mentioned the kind of a lending aspect a few minutes ago, the subprime mortgage world's all but gone. What does that mean to like a person listening that doesn't know? So, so pre oh eight a lot of people refer to it as kind of the wild west of mortgage lending. I mean, there were loan types that required, no documentation relied purely on stated inform. Didn't matter what your credit was, didn't matter if you air quote qualified. So like I'm a gypsy. Yeah. I make $30,000 a year cash from my gypsy job at the circus, but I want a house. Oh no. You just come in hey Mitch. I'm a butterfly farmer and I make a million dollars a year. Okay, I'll write that down on an application and I want a 3 million mortgage. Yeah, let's go. Okay. You know that's very over, over simplified explanation, but that, I mean, that's largely what subprime was. The wild west of mortgage lending that really is not existent anymore. There are a number of different loan types out there, but really none that compare to pre oh eight. So that is a major reason why I don't see, you know, that the credit quality is a lot better. Another reason for why I don't think there's a crash the delinquency and foreclosure rate, you had buying houses at the Master commissioner. Delinquencies in foreclosures are still statistically low. Okay. Went in during the housing crash, those grew exponentially, which we haven't seen. Then you get into some other reasons. You know, for the last number of months nationally, we've hovered around a million units of inventory that's scary low for, and that's national. Put that in context. During the, again, crash, there were probably four times that number of homes for sale. Hmm. And then getting into something that we all probably have realized right now, if you pay attention to real estate, is buyer demand is only growing. And that could be demographically. People of that home buying age is only growing. So for all those reasons, to your point, I don't see a housing crash, especially not in the context that people are thinking based on what we know right now. Yeah. You know, even locally here, I I, I heard the other day from someone that said, you know, Lexington, central Kentucky, we're creating more households that are moving to Lexington every single year than what we're losing. So net net, we're we're positive on households. So there's more demand. And the builders, of course, every year are building a few more houses, but what they're building isn't currently even keeping up with that demand. Hence why I have clients where they have hundreds of thousands of dollars in cash just sitting there trying to find a ranch with within the circle. Yeah. And they can't, even if they're like, I will give you cash in your doorstep right now, they can't get it. They've been looking for forever. That's a hundred percent true. And that is kind of leading into one of the biggest hurdles that we're seeing right now in the mortgage and real estate environment is the inventory. You know, and that's why people have to understand, real estate's largely geographically specific. There probably are some segments across the nation that are experiencing difficult times, central Kentucky's, frankly, not one of them. And I think that's a reflection of yes, the, the positive attributes. People largely have an optimistic outlook for our growth. And that could be for a number of reasons, but because of that and the fact that we're underserved from a new construction standpoint, which you're correct as well. Across the nation, we largely stopped building post oh eight, so we're generationally under constructed. It's not enough to keep up with demand right now. For all of those reasons. You're seeing buyer demand increase Kentucky is kind of crazy right now. From a real estate standpoint. Yeah, that makes me happy to hear. As someone who bought their first house in central Kentucky, as someone who knows less about it than you do, I'm very happy to hear you say there's a chance you didn't buy at the exact top. I might have missed the top by a couple weeks. That's good. So, so that's good to hear. So to turn the conversation a little bit, we've spent most of the time so far talking about broad, here's what's going on in the market. Here's, you know, where we might go. Let's turn the conversation a little bit to everyday people. So, Mitch, if I was a 25 year old who I'm a, I think I'm about a year away from buying my first house. What, what are some things. They should be keeping in mind to make sure that not only they find a house that's a smart investment, a good place to live, not gonna be a financial ruin, but also from a mortgage perspective, what are some things that they should be keeping in mind while preparing to buy a house to make sure they put themselves in a position for success? Yeah. So I mean, mortgage underwriting is not rocket science, right? Mm-hmm. There's gonna be a few key attributes that any lender's gonna look at. Credit's important. I don't care what Dave Ramsey says. Credit's gonna be important. Income and employment. You know, obviously those are two important factors. And then assets. You know, you look at those three key things I could probably tell you if you qualify right now. I like to take it a step further in that in my opinion, if you think you're ready to buy a home or have the thought that you think you will be ready in a certain time, and I hope you all like this word too. Let's budget for it. We have to have a budget. I absolutely hate the question of, Hey Mitch, can you tell me how much I can afford? Yeah. No, I can't. No, no. Let's start with, Hey, how much do you want to spend on your housing expense each month? Let's start there and then we can kind of back into what that looks like. So for me, the number one thing that I would recommend people doing is creating some sort of a budget Now that could look different for different. But especially if you're a first time home buyer wanting to enter the market, sit down, create a budget, ideally no plug to you and your team, but I would prefer them to have a conversation with their financial planner first. We would too. Yeah. Yeah. I mean, quite, and I say that wholeheartedly. Yeah. Because today's day and age, whether that's because of social media you know, the rise of the information that's out there. It largely starts with them finding a home on Zillow, them trying to go look at it, calling me at five o'clock on a Friday night. Hey, I need to get pre-qualified or pre-approved to buy this house. They have zero clue what that payment entails, how much cash it would entail to close, et cetera. Yeah, so for me, I would much rather them approach it from a budgetary perspective before they kind of jump in with both feet. I love to hear you say that too, because the thing that I've seen with a lot of folks my age, that, and not all so sure, you know, preface this, but a lot of times mortgage brokers will tell people you can afford this. And then they'll come to me and they'll be like, well, my mortgage broker said I could afford this, but my budget, I don't think I can afford it. Well, you probably can't afford it. You know, like you need to figure it out before you go to the mortgage broker and figure it out on your finances first before you jump in. And just assume the mortgage broker told you you could afford that much, so you did. Keeping in mind that, I'd like to think, you know, I know Mitch is a good one and I know there's a lot of good ones out there, but there are some mortgage brokers out there, like we said in 2007, that were giving loans to people that they just couldn't afford. So that does exist. So you need to make sure you do your own research to an extent. And be prepared for all that. Wholeheartedly agree. Yeah. I mean, at the end of the day, I tell people what I can approve you for may not be what you want to spend. Yeah. Yeah. So why don't we start with your budget and then we can go from there. Yeah, absolutely. Let's say someone's not a first time home builder or buyer, but they're preparing to perhaps buy a second home. Right. Or a, it could be a home for, their kids are going to college, right? And they want to buy a house to put the kid in and maybe some of their friends, right? We see that a lot of times we're like, I'll save on some of the rent, buy, owning it myself and charging all their buddies, or they want a vacation house or just special needs. They gotta buy a house for their elderly parents to move 'em closer. Are there any, is there anything different for that person that they should be considering when they already own their home, first home, but they're preparing for that second home purchase? Absolutely. And this is where I think you can get it into distinction between, you know, a mortgage loan officer and then the mortgage loan advisor or planner, right? Because this is, we're getting into the conversations that I think are fun. What I do is more than just quote a rate. Like if you're just talking to someone to quote a rate they're doing but how do we, we accomplish what you want to accomplish? Again, I, I think those are great conversations to loop in your financial advisor, cpa estate planning attorney, because those things are all gonna have a major impact in the decisions you make. So you're, you're your second time home buyer, right? Hey, they're ready to step up, you know? Some things to think about. We kind of alluded to one of them a little earlier. More than likely, I, I got that first home. My rate's two or 3%. Quite simply, do I keep that as an investment property and then buy a second home? Because you can do that from a mortgage perspective, getting into that. Should everybody be a landlord? Maybe not. So that is something to consider purchasing an investment property, you know, which would probably fall into that other example that you mentioned of, hey buy a home for my college age kid. That could be another kind of conversation. Depending on what location you're in, that could change just geographically, that could be a little different. What is the capital? Capital expenditure on investment properties? It's gonna be a little higher than maybe buying your personal residence, or at least from a loan perspective it could be. Is that something you're prepared for? Does that fit within your financial plan? Those are all things to consider before you kind of enter into any real estate purchase, but especially subsequent real estate purchases. Mm-hmm. Okay. Now I think that's something that, everybody's trying to figure out how to do. I can't, yeah. I can't tell you how many calls I get. Right. When people are like, well, I've got this need and I'm trying to figure out how to fill that need this change in my life. Yeah. Right. We have like in in our world, we see a lot of new graduates, right? Mm-hmm. That are just kind of getting to that point of striking out on their own. And they truly are saying what do I need to do to save for that house? But then we also have that next step up, especially going into wedding season, right? Is the folks where they're, where they're going and they're like, I'm tying the knot, right? So I'm not just a new graduate saving for that house, but I'm tying the knot. I definitely need that house now. Right? Because cuz Mo wants a house, right? So, so, and I can't, I can't look her dad in the eye and be like, you. We're gonna be okay. Right? They, they wanna know where we're gonna live. So that also enters that conversation for those folks big time of just the consultative approach. Absolutely. Yeah. Advice for people that have already done all these steps, they've gotten ready to buy their house and they feel like, okay, I can afford X dollars a month. Now, Dave, what do I. I'm ready to buy the house, or Mitch, what do I do now? What? What would you say to them? What would be your advice for those people? So have we already picked out the house? We've picked out three, but we don't know which one. Okay. How about about that? So from my perspective, let's just say they have children and the kids are of school age, right? I mean, the natural thing to say, Are you planning on sending your children to private school or do you want 'em to go to public school? Mm-hmm. And if, if, because I've seen in a lot of neighborhoods that it may be a $50,000 difference between a house and a neighborhood that is maybe got a really crappy public school versus a house and neighborhood that's got a really nice public school in town may sell at a premium. Yeah, right. If they're going to private school, it doesn't matter if, but on the other hand, if they're like wanting to send their kids to public school, nothing wrong with that, I've done that with my children. Then they really may want to consider what neighborhood they're getting into and what those future elementary, middle school, and high schools are going to look like for their kids. That would be kind of the number one thing that I'd step on. Assuming that all their other financial stuff is in order. Yeah, absolutely. So my number one step would be pick out your team. I think at this point in your life you should have a professional team, and that's gonna entail a financial planner, cpa, insurance, mortgage advisor. And then interject, real estate agent, always work with professionals. I'm not the biggest advocate of being unrepresented in this type of transaction. So that would be my number one thing is, is pick out your professional team before you go a deep dive. Hey, I wanna go look at this house. I'm gonna go talk to a random realtor, or what have you. So that's my number one thing. And then after that, let's say, okay, we've got my team picked. On the mortgage standpoint, we've had the conversation with the financial planner or the cpa. Hey, we're in a good place. Let's buy this house. Please take the time to be prepared. Get pre-qualified or pre-approved. No, no disrespect to Rocket or Quicken. Don't go click the 32nd little pre-qualification on rocket.com or whatever. You will get unlimited calls, correct, unlimited texts, unlimited email, and you'll get them on all kinds of subjects, not even on a mortgage you will get, you'll get spam. That's guaranteed. But in my opinion, that defeats the purpose because then you're not gonna know, again, those budgetary things that we talked about. Once you've kind of got an idea of what you're looking for, we need to understand the payment. Excuse me. We need to understand how much cash we're gonna need on hand. So number one, get your team. Number two, be prepared. Get pre-approved. Absolutely. Good advice. So next step. I've owned my house for 20 years and kids just moved away to college, and we're gonna buy that rancher like Dave was talking about, but first I need to sell my house. Any advice for those people out there that are looking to sell a house for the first time or maybe not the first time? Yeah, number one, say that that is a real scenario, especially in our statistical aging population that we have. Yeah. That is a real thing. So the first point that I just made is gonna be the same. Contact your professional team, cuz now you're getting a little bit more complex and they're gonna be different ways to do this. Not only from a financial perspective, but a tax perspective. Estate planning, you can, you can enter in the trust or estate conversation. As a potential seller, being prepared is gonna be equally important, maybe in a little different way, and that's when maybe just on the real estate specific side, have a real estate agent come in and give you an idea of, Hey, how quickly could we sell your house? What could we sell your house for? I hope that they would ask you, what is our strategy for your next move? Are we relocating inside a local area? Are we moving outta of. How do we do that? Do we make a contingent offer? Which is something that as the market gets busier, is gonna be less advisable from a competitiveness standpoint. So the number one, get your team together is gonna remain the same. And then secondly, be prepared in a little bit of, of a different way and have an idea of what you're gonna sell and then where we're gonna go. Gotcha. You know, and I'd come in, I'd come in from the tax standpoint. It used to be that in central Kentucky, our real estate did not really appreciate a whole lot compared to the rest of the country. And so when people were moving or downsizing or, or things of that nature, we didn't get into capital gain situations with people because their their capital. Tended to always fall under the federal limits, right? Where, where with, if you're selling a qualified home that you've lived in for two years or more, you know, you can exclude 250,000 in capital gains if you're filing single from that sale. And if you're filing joint return, you can exclude 500,000 in capital gains. It used to be that, that everyone we saw that was in Central Kentucky. They did not have those type of gains. So you may have a hundred thousand capital gains or 200,000 capital gains, or for 300,000 capital gains for a large home, but we weren't seeing six or 700,000 where suddenly they were going to start to have to pay capital gains on their family home when they downsized. And so that's something that I always just try to find out as soon as possible. With what they bought their house for. Any kind of home improvements they made into it to try to establish a basis in the home and then what they're looking to sell their home or list their home for, just so that they understand before they take those proceeds, downsize and spend the money on something else that they've remembered that there are gonna be some taxes coming due. But then the other side of it, it's not as simple as taxes if they're 65 or older. Right, and they're on Medicare, they could actually be penalized on those from those capital gain sales on their Medicare payments. So, suddenly a Medicare Advantage payment that might be 150 bucks will just average a month per person might suddenly go to 300 bucks a month or 400 bucks a month, or as high as 500 bucks. And that can make a big difference in a family's budget when they thought they were downsizing to save money and then all of a sudden for a year or so, they're penalized on additional Medicare costs. Mm-hmm. So just from selling their home. Yeah, absolutely. There's, there's a lot of things that go into buying and selling that I think you can't get into a 20-second Instagram reel. And I think the most important thing that was said was what Mitch said, of just having your team in place. Yeah. I don't know enough about real estate to be a realtor or mortgage broker. So I have a team. When, when I bought my first house, I felt a little overwhelmed, but with the right people around me, it made it a lot simpler. So on that theme of buying my first house, I thought I'd throw you guys on the spot a little bit and do something fun. One good story from your first time you bought a house. Mitch, do you have any, any good stories for us? That I bought personally or, or from anyone else too. I guess for you it'd be, you'd probably have some more fun ones from other people. So per personal story yeah, and it kind of ties into what Dave was talking about. I could talk about capital gains. Ask me why. Okay. Well, I'll tell you why, why Mitch? So, so my wife and I bought our first house in 2015, here in Lexington. Paid 115,000 for it. We bought this purely because of the location. You had mentioned school district, which, hey, I can't advise on, so no one takes school districts under advisement, right? We bought the home in 2015, paid 115 for it. To give you an idea of how crazy the market became, I got solicited a cash offer. I got a letter in the mail saying, Hey, I want to be in this area. I want to be in this particular subdivision. I'll give you cash. Wow. I had no idea why I really opened it and paid attention and read it, but I did and I was like, well, crap. You know, I, I looked at my wife, Jamie, and I was like, we didn't buy this with the intention of making a ton of money. We bought this for other life reasons. I mean, I can't largely walk away from this sum of money, and honestly, I wish I held onto it cuz those places are trading for much more than that now. But hey, hindsight, I didn't know the real estate market was gonna continue on that path. So we sold that thing in a year and a half, walked away with, a couple tens of thousands of dollars, which at that point to us was a big deal. Yeah. Now thankfully I had asked some questions about capital gains cuz I sold it for less than two years. I was subject to capital gains. I was actually able to decrease my capital gain exposure because we had done a few, and I'm using air quotes here audience, improvements. Sure. So it actually worked out really well. But that was kind of a cool story and does, I think, reiterate the power of real estate and the appreciation along with, hey, some timing, some good luck on timing. Yeah, absolutely. Dave, any stories? Man, I think first house, other house, I'm thinking back to my very first house that I ever bought. Okay. And when I think of why people buy houses, right? I always tell people when they come in and they're concerned about the interest rate right now, right? The interest rate for a new buyer only matters as much as can they make the payment on the house, right? Because when I first bought my first house, I think rates were around six or six and a half percent for my first mortgage. It was up there. We'll just say, we'll just say six. But the reason I moved into my first house was because it was only a hundred dollars more to own my own home, so I thought, than what I was paying for rent at the time. Right. So it was just a natural like, yeah, we're in a two bedroom apartment. Right. We're gonna get a three bedroom house with two bathrooms and our own laundry and our backyard and a patio, and we didn't realize a whole bunch of college neighbors because their dad owned the house who threw parties at night. That's for another time, but we had no idea. Different podcast. We'll talk about that story. Yeah, about, about bad neighbors. I think that we should do a podcast just on bad neighbors, but some that too, you, we will invite you back for that one. But the thought is, is that when, when we bought this house, it was just, we could afford it. It was a hundred bucks more. And in my mind and in my budget, I could afford a hundred bucks more. I had no recollection or no idea at the time of like, oh crap, I'm gonna have to buy a lawnmower. Oh snap. I'm gonna have to do some gardening and some weeding and get some tools for that. Oh, I need hoses to water this yard. How about the roof? Oh yeah. I mean, just literally anything and everything. Oh, all the furniture that we have. Well, that's no good. We need new furniture for the new house. Right. So it was a money pit, even though it ended up being a great investment. I think I paid $89,000 for it, which was like, I mean, I took the upgrade and got like the linoleum floors. Okay, you went all out. Yeah. I mean, linoleum floors, right? I mean, and I got the deeper cabinets, right? I mean this was like, these were big changes, you know, in the house and I think when I sold it, I think I sold it for $141,000 and I sold it in, let me think back. It was I sold it in either 2004 or 2005. I listed it with a buddy and I thought he was the best realtor that I'd ever known in my life because he sold it in exactly less than one day. He sold it in like 22 hours, and I thought, how in the world. By the time I moved to my next house, I think in the next couple years before the housing crisis and crash, that house I think changed hands around 180-190, just to kind of give you an idea. But so did the house that I bought. Right. It was trading up before things kind of settled. Sure. But I just remember kind of the same thing as you. I bought a house and it was just like, it appreciated so quickly and it was so fast and, and it was like, wow. Home ownership is awesome, but I had no idea longer term what the actual costs of just operating and functioning on a daily basis around a house is, you know what it's gonna be. I may or may not have told you that I had to replace my H V A C unit within two months of living. Oh, ah. That's what we had that one in our first year too. Yeah. I got a fun story too, we're looking for a house. We got married in September of 21, so we were looking to buy one in the winter, spring before we got married. And yeah we had, during that time in early 21 houses that went for sale were just flying off the market. Just they, you put a house for sale and sell in two days, so buying it was not a great time to be buying. Or so we thought at the time, so we had put offers in on two different houses and we had got outbid on two, but we didn't wanna overpay. We were trying to be smart. We had found a bunch that we liked. And we kept getting rejected for the ones we liked and we were just getting very discouraged. So, you know, we took, we decided, you know what, if we need to rent for a year, it's all good. We'll just take a break. And that conversation was Thursday night over dinner. Well, that Friday we were going to visit my sister in Virgina. And I'm driving through the mountains of West Virginia on the way to visit my sister. And I just see Katie over there on Zillow just swiping away. And and I go, what'd you find over there, babe? Because she'd been in the same house for probably 15 minutes. She goes, I think this house is perfect. And it was five minutes from my work. Katie works from home. It was the exact size we were wanting it. Fenced in backyard for the dog that we wanted. It was the same open living room kitchen we wanted the whole nine yards. And I'm like, you wanna put an offer in on it, don't you? And she's like, no, we said we were gonna wait. And she's like, we're gonna be out of town all weekend. And it says, all offers have to be put in by Sunday at five, and we're not gonna be home till Sunday at three. Well, long story short. We ended up driving home very fast on Sunday morning and we ended up getting the house and we're very happy with it, but it was awesome. It was just, it's just funny how, you know, you search and you search and you search and you plan it all out and sometimes the thing that you don't expect to happen ends up being the biggest blessing in disguise with this stuff. So. Absolutely. Yeah. That's great. So anything else to add for you guys? You guys got any last things to say, Mitch? I'm good. I appreciate the invite boys. Respect what you all do and, and hope to do it again soon. And if Mitch, if someone wants to get a hold of you off this and they say, Hey, I, I do want someone to kind of be in my corner that can act as a consultant to me. Yeah. And just help me with my needs. How do they get a hold of you? Yeah. So I may or may or may not regret this, but hey, cell phone's always best. So call me, text me. Eight five nine five three three zero seven. And if you have questions for Dave and I based on this, you can call us. You cannot text us. Don't text Dave or I. You not text us, but you can call us so you We get in trouble if you text us. You can't text us, but you can call us office number (859) 219-1006. Well, thanks everyone for listening to another episode of In My Day. I hope you enjoyed our real estate tips and tricks for the day. And thanks again to Mitch for coming on. We really appreciate having you. Absolutely.