Today Rob and Adrian share a story about the mindset behind buying your first home and things you should consider. Tune in and let us know what you think.

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Episode 31 Transcript


home, people, rent, house, big, compromise, miles, Adrian, market, Idaho, rental, buy, talked, point, wife, rental market, uber driver, story, pullman, hear


Rob, Intro, Adrian

Intro  00:02

Welcome to the get rich, slow podcast. This is the stuff we and our expert guests wish we knew a decade ago to get the most out of our financial life will provide you with insight into wealth building activities and practices that can expand your net worth exponentially. get insight from top professionals who will reveal how to build wealth the long way, work smarter, not harder and identify your financial blind spots. With over 25 plus years of experience as licensed real estate professionals and a long track record of winning for their clients. Robin Adrian will teach you what it takes to be an everyday real estate millionaire.

Adrian  00:44

Hello, future millionaires and welcome back to the get rich, slow podcast. I’m your co-host, Adrian Shermer, and I’ve got robbed elegant Here.

Rob  00:52

Good morning. We’re looking forward to a fun one today.

Adrian  00:55

All right let’s fire it up.

Rob  00:57

Okay, so this is I’m going to try to tell you guys a story in his linear of a way as possible with a whole bunch of different points. And Adrian just hit me with all of the relevant questions because you get them all. This last weekend, it is fall time. So, it was the end of September. I was sitting down and having a discussion with my brother-in-law, who has been married to my sister for maybe a couple years now. And they are looking for their first home.

Adrian  01:34

The warms my heartbeat, I love a first-time homebuyer story.

Rob  01:38

And it is and they’ve enjoyed a good portion of it. They’ve seen a couple dozen homes already. And they’re in eastern Washington. So, think Washington State University, and it’s right on the border of Washington and Idaho. So, Lewiston, Idaho Pullman, those are kind of the two places they’re 2030 miles, there’s some ancillary markets around them, that sort of thing. But there’s a big divide there between Washington and Idaho, different tax laws, different political affiliations of the two states. Yeah, which is interesting. Yeah, Idaho is deep red, and Washington is deep blue. And just a lot of different things going on there. With my sister and brother in law’s search, the number one thing that he was selling, and by the way, I’m in the Portland metro area, which is, I don’t know, a couple 100 miles away, this is not an area that myself nor any of my brokers or my brokerage serve, so they have their own real estate broker there. It’s always kind of fun to listen and hear just to hear what experiences are with other folks in my exact profession.

Adrian  03:01

Yeah, and I find that fascinating to sidenote. This isn’t 100 This isn’t like always, you know, rule of thumb true. But I have found that some of the more successful Realtors actually have a narrower you think the map gets bigger, but sometimes the map gets smaller, because they go, I’m going to focus on my market. And even though I could make money on this person all the way on the edge of the map, I don’t know that area. So, it’s better service to my clients to refer them to someone I vetted than to go, I’m the smartest person in the world, I can do everything I can do any loan, you know, anywhere, especially realistic, you have to do transactions in that marketplace. And you got to have, ideally, I like how your brokerage is set up, because you guys are all learning from the pool, even if someone’s a new broker, and if they join your team, they gain access to that knowledge. And, you know, that’s something that has a lot of value. To me.

Rob  03:49

It’s a concept of, you know, I’d rather be you know, a mile an inch wide and a mile deep, you know, in my in my profession, then, you know, a mile wide and an inch deep. Yeah. And then you can surround yourself with mild deeper next to you, instead of having to do it all yourself. The so where they’re at is my sister doesn’t, she works in Pullman at a local hospital there. And she doesn’t like and has some anxiety with driving in that area in the wintertime, the 2530 miles that it would be to drive from Lewiston to Pullman five days a week as a commute, especially in snow and ice and you know, all of that there’s some there’s some pretty steep hills and different things which you know, I get it. Not, not a lot of people from Western Oregon, who don’t really experience much snow ever. Just that that’s an understandable anxiety point. She is going to have to grow into that. She’s going to get used to it more and more. But that’s probably going to be a thing that takes you know, probably a few years.

Adrian  04:58

It does it does happen faster than you think that when my wife moved with me to Maine for a bit, which is where I grew up, I’ll never forget because she was she’s same thing hyper nervous, we did the parking lot thing you know, you write the brake, you try to upset the car, help them understand what it feels like to slide and how, how to react to that without panicking. And I’ll never forget, she called me once she was like, I’m at work, I saw a snowplow flipped over on the highway. And I was like, Oh, my God, what

Rob  05:22

do you do? Well,

Adrian  05:23

I had to work. My shift was going to start so I drove to work. And I was like, wow, that’s, you’re a true painter. Now. You’ve earned your

Rob  05:29

stripes. Exactly. And it will happen. But that’s going to happen over time. And let’s be real. And this is the fun part of you know, the stories of these real estate transactions. It’s really not about the real estate. It’s about the person and the people and the relationships and their life change intersections of buying the real estate, right? Yeah, they’re gonna buy it for a reason. So that’s a big driver for her. And that’s not going to go away any fat as fast as it takes the time, you know, two months, three months, whatever it is to buy a home. So, she has to work on that. Well, you know, we always hear happy wife happy life from all these husbands, especially the newbies, right? The US veterans, you know, we just know that’s a baseline. Yeah. So anyway, so they the brother-in-law, the husband, he’s telling me, well, you know, she wants to be up in Pullman. And I want to be down in Lewiston, where it’s cheaper, and up in Pullman, and you know, he’s he grew up like a conservative type of guy, and Adrian and iron in the business and making judgments. This is this is just the story. But he was saying, I don’t know that I really want to live up there. And you know, my wife and I are kind of going back and forth. I don’t really want to pay the extra to live in line next to in a liberal college town. And he’s definitely looking down his nose at liberal. Right. Sure. And, you know, so I’m going, Okay, interesting. And then what?

Adrian  07:01

Well, cultures matter, you know, so, so we’re at location, super common one.

Rob  07:07

Right. And, and kind of weird that it’s like political, you know, but I mean, its, people care about that the

Adrian  07:13

denser area here, less dense area, there is a swing,

Rob  07:16

right? It’s so then, and then as price, right. And then of course, they have their list of all the things that they’re looking for. And at the end of the day, it’s $100,000, more up in Pullman, than it is to be in on the Idaho side, you know, 25 miles away. So, at that point, I’d heard enough to really start asking some probing questions. And my questions are, okay, so what, you know, what have you found? Is it doable? In the two locations? Where are you at? What is the compromise, and we just start going down that that list, and where we basically came to was, and just for brevity’s sake, I’ll lead you straight to the answers. First of all, he’s not buying his dream house, the house that he’s buying right now is getting to the point where he’s actually paying every month, a mortgage, yes, it’s interest. But interest is favorably looked at from a tax standpoint, also, he is paying down his principal, every month to a certain degree, even at the beginning of a loan, even though it’s a smaller amount, but he’s getting nothing from his monthly payment in rent. So that’s his big transition right now. And he’s focused on that. And he gets that and that’s why he’s looking for a home, you know, they want and then also as a relationship, they want something that they own that they can do with what they want, they like, you know, a little bit of a backyard out there, this is a little bit more rural America than, you know, what we’re dealing with. And you know, the bigger cities on the West Coast, we don’t really consider them west coast, even though they’re only at you know, the other end of the state. So, at so where we were we came to was okay, I needed to explain to him or get him to explain to himself, which is actually better than me just making points. The fact that this is not your forever home. This is a starter home, this is a big step, going from a renter who’s not building wealth to an owner who is building wealth over time. And he’s probably only going to be in this house for a year or two. Political affiliation doesn’t really matter if you’re keeping an eye on that big picture of hey, I need to not be paying rent and I need to be owning and paying down a mortgage. And coupled with your wife isn’t going to be happy 30 miles away right now, as she works through the anxiety of dealing with you know, driving in the snow in the winter conditions. So yeah, the moral of the story at the end of it. He basically told me, so I’ve been doing and thinking 100% wrong on all of this? And I said, well, since you put it that way, yes, you have, because you’re prioritizing all of the wrong things. Sure, the priority here is getting into a home, making sure your wife can work through, you know, her anxiety and her concerns. And you’re gonna have to work on that separately from a real estate transaction, but it’s not going to go away overnight. But you can own something. And, of course, if he’s not into being living in a liberal college town, in a couple years later, buy another house, and she’ll probably be working elsewhere or be more used to it. And frankly, if you if you’re not a big fan of liberals, if that’s your issue, then rent to them. Their money, the same color of green. Yeah, you know, this is where, like we say, and I don’t necessarily affiliate with him, you know, in on that side of things, but I’m saying, hey, if you have a problem with that, then, you know, revenge is the best revenge is living life. Well, right. Yeah. Just as when absolute rent to those guys, those, you know, yeah, well, college is not infected with a lot. That’s the point. And, and actually, I was talking to one of my brokers about this exact same thing. And that’s exactly what she said, she said, you know, living in a liberal college town for a couple of years is not going to turn you into a liberal, unless their ideas are really, really good. Unless they’re right. And, you know, if that’s the case, then you’re gonna lean more that way, you know, than you otherwise would. So

Rob  11:45

that the, the process, and it took, we talked for probably an hour and a half. And that process, going from somebody who smart guy has no debt has a good job he’s married has a wife has a good job, you know, between the two of them out there in a much cheaper market than, you know, Portland Metro, definitely much cheaper than, you know, the big cities, California and New York, you know, so forth. They make good money, you know, they between the two of them, they make into this low six figures. I mean, sure, they’re perfect, have great credit, you know, the IDI sevens. I mean,

Adrian  12:22

perfect. We work with people well into income, well, well below that. But when you’re in that range, unless you’ve really laden yourself with debt, odds are you can very easily use the word but yeah, you can generally tuck away the down and, you know, make it happen for yourself, and you should write, but it’s an interesting dichotomy there. And this is kind of indicative of this gestational fear period that we have talked about a few times, which is, you don’t just it’s not, I mean, I’m a hybrid researcher, for all the stuff I do. But you know, some people decide, hey, I need a car, they go to the dealership to pick the car up, a home is a much more complicated, because there are like, you’re saying, here, this is a factor that might not matter at all to certain people, they just see a house as a house. And they don’t think of the political influence or what culture is in that area. And they’ve got to sit there in line item, these things out and go, Okay, I want a big yard. And I want to live in the city. What was that cost? Together? What’s the intersection of those two things cost? Actually, it could be $200,000. And in the sticks, it could be there aren’t even houses that don’t have giant yards, that we don’t have any lots out here. So, you’ve got to guess and test your way through that process. And it’s worth thinking about because you’re right, is not being in a liberal town worth your wife being afraid to drive every day. Right? And he would say laugh in a heartbeat, he’d say, and that but I hear that much. Exactly. You’ll find out what is important to you in this process. If you if you take the time. Yeah. Make to be deliberate about it. And we’ll see I think the people who do this we see less buyer remorse, would you agree?

Rob  13:57

Right. Absolutely. And to your point, the last piece, which really was kind of in the middle of this entire process, or the entire conversation was that concept Exactly. Is well I’ve seen 25 homes and there’s not really anything that I can afford. Well first of all, that’s not true. Because he could afford a lot more than what he’s paying right now and rent he’s paying like they’re, they’re renting out a little tiny home out in the sticks are just far enough out in the sticks that the rental there just has no met rental market for it. And he was trying to relate that to what it would cost to own a house. Well, the monthly payment on that leads to that that cost needs to be somewhat in line with what he could rent the house for as an exit strategy if and when he ever needed to relocate elsewhere. Both Adriana, you’ve talked a long time about or many times about an exit strategy other than you know, short sale foreclosures if the market goes down, that sort of thing. Well, if you’re in rental home and just float, roughly breaking even. Usually, you can ride out a market a bad market turns that sort of thing. So, absolutely. Your point there. Exactly. So, your point there is, and really what I was telling him in, not so many words is quit being cheap. Because really at the end of the day, his wants anybody who tells you that, oh, I can’t find a house with it. And there’s

Adrian  15:34

I don’t want to compromise. Right? That’s what I hear. That’s exactly.

Rob  15:37

So, price or product. The housing market is Uber efficient. This isn’t 35 years ago, when your parents got the phone books from the listing service. Yeah, that literally had each page was a house for sale. And it came out every quarter, right? People could race out the first few days and not have competition because they got to it faster than others. Right? The internet has created a whole new universe you can window show every single home.

Adrian  16:06

I’m a car guy. I’m a car nut. How is that a car market right now collector car market? Everybody knows what they have. There is no barn find anymore that that is like, we’re going to talk about that someday and laugh about, you know, you used to be able to find the wanted ad or the What’s that? The famous joke about the gal? You know, she sold the Porsche for 2000 bucks or whatever. And it’s because it’s her ex-husband’s and he said, exactly sell it for me. This is, you know, it impacts other markets. And it is it is capitalism and action. But it is kind of that self-adjusting system where capitalism sort of works. To a degree it’s a successful system in its own self adaptability.

Rob  16:48

Right, right. It’s Uber efficient. And at the end of the day, somebody says, oh, no, I can’t find any houses. Oh, there’s not enough inventory. No, your budget doesn’t match what you’re looking for. Yeah, you’re not. So, you need to up your budget. You know, the rough way to say that is quit being cheap. Four, or lower your expectations, you know, lower square footage, one less bedroom. Okay, you went home with one car garage, painful instead of two or three smaller yards. I mean, you know, different things. And it comes back to their individual situation is, you know, they’re looking for all of these different things. And in Pullman, which is, you know, the more popular area, yeah. is, you know, close to college, that sort of thing, much higher rents. We’re talking like, 20 30%, higher rents. Yeah, but 20, you know, and he’s complaining that it’s 20 to 30%, more expensive. So, as soon as he kind of chewed into that, it became very obvious to him, oh, okay, well, I need to adjust. And frankly, you know, and you know, he’s not a dumb guy. I got to do what my wife wants me to do. First of all,

Adrian  18:03

it’s very interesting. Yeah, we see this a lot. We see this a lot, a lot, a lot. This is not, this is an anecdote, I know. But I have run into this behavior. Many times, it is a folly of, especially first-time homebuyers, they will fall into this trap where they see a house, it’s almost perfect, but it’s just missing that one thing. And they do that about eight times in a row. And their expectation is that price point. And then and then they find the house that has everything, and it costs more, and they but it costs a lot more like a lot more. And that’s because that that combination of all those things, we talked about this a bit location, yard garage, these are some things that like, aren’t hard to find in a metro area, right. But they’re really hard to find all together at the same time, usually, some compromise had to be made, or that’s the diamond in the rough and everybody knows it. So, when it hits the market, it commands a premium, because it is one of very few properties that do check all those boxes. And most properties by nature of budget or, you know, the physical landmass that they’re on or whatever it is, they have some sort of compromise, that was fine for the person who owned it, but might not be fine for you. So, you’ve got to choose between those compromises or find a way to raise your budget. And I think they’re that a component as well as the permanence that people feel right. I’m signing up for a 30-year loan, I’m buying a house you know, there’s all this money closing costs, etc. But as we discussed, you know, you’ve got to sometimes just appreciate that this is going to be very likely a steppingstone, especially if it’s your first home. Right. Spend some time now you’re leaving home. Yeah, yeah, no. And the alternative is a compromise as well. It’s renting. It’s no equity. It’s whatever is available on the rental market. It’s funny how many compromises people will accept for rentals because they see it in their mind as a more temporary thing even though people will stay in the same rental for about the average is about this same six, seven years, six, seven years for a house to some people buy a house and keep it forever, maybe your parents did. And that’s the ideal that you’ve gotten your head. Sure, but that’s because by the time you were born, or shortly thereafter, they did buy the house that you lived in for 20 years. Right. And it was their third house, or their second house, at least most typically.

Rob  20:19

So, the I’ll close, you know, this story with addressing kind of that myth of the dream house, right? Everybody, typically, like the typical bell curve, right, the vast majority of people, especially, you know, families with children, and that sort of thing, and eventually, you know, kids, but then, you know, retirement and, you know, more financial independence, usually, with retirement and so on. What happens is your dream house, you know, that wide eyed couple, you know, just got married in the last few years, you know, and they’re all so happy to not be renting anymore, and they just, they love their home, they’re so excited and so proud of it, right? That first home, that’s where my brother and sister are my brother in law and sister, then, you know, if they decide to have children, or if they decide not to, who knows, but their incomes going to increase over time, their taste is going to increase, and they’re probably going to buy a second you know, another home and either keep it as a rental the first one or sell it family scale. Exactly. And then, you know, let’s say they have a couple children, they scale up again, you know, they get a couple dogs and a cat, and, you know, all the all of the things that go with that, well, you end up at, you know, to 20 503,000 square feet above up, well, then the kids move out. And the same thing, this, this is that normal process, that dream home, you know, you finally get that dream home, the kids are in it for three, four years during high school because you actually could afford it. And then they’re out and now you’re dealing with 3000 or more square feet, and you want to travel you’re working, you know, you just want to simplify life. You don’t want to clean you know, five toilets in the house. I mean, just all of these things and then it’s

Adrian  22:06

25 miles worth of banisters and baseboards and baseboards and

Rob  22:10

and you end up with contract it just because and then like single level versus two levels, two thirds are very efficient for you know, homes with lots of people in them, but less so, you know, conversely, it just it gets very interesting how the Dream House morphs. And eventually it’s okay, I want to condo, that service via an elevator, that’s a quarter of the price of what I really do. And so that I can you know, buy the second condo in Hawaii or in you know, Panama or wherever I want, you know,

Adrian  22:46

great well look down on condos all the time. And I love I know, I know people, there’s some people, they’re just like, Dude, I don’t do anything. So great. I’m like, that does sound pretty sweet. It’s sounds pretty great. You know, with Yeah, you and I, once you get a house, that’s let’s say 2000 square feet is or more. Right? It is like, it’s a part time job taking that, you know, yeah, I can’t, I’ve spent too many hours of my life cleaning baseboards.

Rob  23:11

So, so anyway, so it just, it’s taking the people through this process, and trying to get them and I can’t just tell them, hey, tackle this, this learning curve dummy. Like I can’t do that it’s not going to get it’s an experiential learning, they have to go through it. With that said, they can tackle it a lot faster. If it’s brought out of them in a, you know, sensitive, caring way. Yeah, but also in a factual way. And it requires a lot of relationship and a lot of trust. And the quicker you can build that trust, the quicker and easier they’re going, most people are going to be able to hear the more pragmatic side of, hey, let’s get you into something that’s going to work for you and serve your needs today. Because two, three years from now, what’s going to serve your needs today is going to be different. But you can take those steppingstones and the hardest house is always the first one, right? The second hardest one is the second one. And then after that it starts getting easier. So

Adrian  24:13

yeah, for a lot of important pieces I need to go into of that psychology. So, I love this story. It also highlights the difference between a real true-blue realtor, and you know, what would you I love that phrase you had it’s like an Uber driver with

Rob  24:30

Oh, yeah, unfortunately, my industry that I’m in, you know, a good I don’t know, plurality, maybe even majority of us aren’t worth a whole lot more than, you know, Uber drivers that opened doors. And it’s unfortunate because those of us that really, really focus on what our clients need and a lifetime of wealth building through real estate.

Adrian  24:58

We’re saving them from very expensive mistakes, it’s hard to undo a mistake like that, like choosing the wrong location, because you didn’t really have the value proposition laid out, too. This is what it actually cost to live here. And here, here’s what you’re paying for. And that’s, again, part of that deeper market understanding as well, understanding this is how far out you have to go to get what you want for the price you want. So, which compromises we’re going to make to bring you, you know, to offset the other compromise.

Rob  25:29

Right, right. And that’s the whole big concept, you know, the get rich, slow podcast, you know, everything that we’re doing and talking about, you know, we’re also I say this all the time I have it behind me making every day real estate millionaires every day. Well, yes, we’re making steps to that. But what we’re not saying is, you’re going to get rich tomorrow. Remember, it’s the get rich, slow. The idea is, is make really good choices with really good professionals that are going to help you win at this game over the next 30 years. And you do it, you know, you can’t help but win. So anyway, we should leave it there. This is a fun one. I don’t know in the next three to six months, I’ll update you guys and tell you what they ended up doing. Please do it. It’ll be a really interesting. Just an interesting thing to follow. So

Adrian  26:24

All right. Thanks again, audience for joining us on this episode of the get rich, slow podcast. We’ll catch you next week.

Intro  26:31

Thank you for listening to the get rich, slow podcast. If you like what you learned, please subscribe, rate and review so we can grow wealth for even more families.

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