Programs For Student Loan Forgiveness

SUMMARY KEYWORDS

student loans, debt, income based repayment, people, talk, nonprofit, nurse, degree, years, student loan forgiveness, pay, forgiven, accruing, career, income, payments, adrian, interest, millionaires, professionals

SPEAKERS

Rob, Intro, Adrian

Intro 

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 

Hello, future millionaires. Welcome back to The get rich, slow podcast. I'm here with my co host, Rob Delavan. This is Adrian SHERMER. And today we are going to talk about student loans and more importantly, the programs that exists to forgive debt, you've probably heard that a penny saved is a penny earned. Well, a penny forgiven is just as good.

Rob 

Yes, I agree. And good morning. Specifically, there's a program. And it's student aid.gov is one of the places you can go to there's a there's a bunch more. But this is called a public service loan forgiveness. PSLF is the enact is the acronym that you'll type into Google and student student aid.gov. And you'll get there and it talks all about it. But before we go there, let's back up a little bit and set the set the table for this conversation about this particular life hack product. Yeah, you know, issue. So, you know, you were talking about this, this came up a friend of yours got a degree in or a law degree is that correct?

Adrian 

Yeah. Yeah. highly intelligent, very well read. And she chose, you know, of all things you can do with a law degree, she chose to go into the nonprofit sector.

Rob 

Right. And, and also some more details how, how old is she? Roughly?

Adrian 

She's in early 30s.

Rob 

Okay. And she probably went to school, you know, it took what, like, three years as law school after? Give or take?

Adrian 

Yeah, yeah, it's a haul. And it's not, not a small amount of debt. She even tried to and this is something I want to expand on in a different episode. But, you know, she even loaded some of the debt on her credit card, some of our costs expenses, you know, to try to trim down on student loans, thinking that would give her the best pathway and still accrued, you know, what is now sitting at about $100,000 worth of debt,

Rob 

which is actually not a lot. I know, now I have a friend career. Yeah, who is in that same career path. And his was well over 300,000. And so one of the things we'll talk about, and with this loan forgiveness program, obviously, racking things up on a credit card versus actually doing it on the student loan side was probably not a great idea. But she didn't know. Yeah, she just she didn't know. So. Okay, so she has a ton of debt. She's 30 years old, 100,000 plus in student loan debt. And she's now working for a nonprofit. And this Public Service Loan Forgiveness situation is there for that the basics of it are, if you make 120 payments, while you're working 30 or more hours a week for a nonprofit,

Adrian 

yes,

Rob 

you will get your loans forgiven. So if you know that that's the case, and technically, and one of the caveats here is technically the government Congress could do away with this. You could be six years in and make minimum payments be negatively accruing. You know, interest only based on income based repayment,

Adrian 

as is often the case, that's

Rob 

exactly the norm. Like you're, you know, you're paying 400 because you make $70,000 or something like that, instead of I mean, this was 60k. And she was paying $35. Okay, there you go.

Adrian 

So she, I mean, her and this is not an abnormal setup. I see this pretty regularly, honestly.

Rob 

So she's totally negatively accruing. And, you know, there is some risk here. Like I said, Congress could totally take this way. would they? Probably not making a bet here, but she's negatively accruing due to the interest rate. She's making $35 a month, she makes 120 payments, so it's a 10 year process, and then she'll have probably 120 130 $140,000 wiped away. Yeah, of student loan debt. And the only question becomes as a man if you could do this. Why didn't you just do $200,000 in debt and enjoy yourself while she was in college? Right?

Adrian 

Yeah, arguments could definitely be made for a strategy of you know, use student loans, the way That they're intended to be used, maximize them not to buy a jetski per se, but you know, to afford the cost of living and to put focus in your studies and serve working some part time job or whatever to try to supplement you know, right. or putting it on credit. abusive interest rates,

Rob 

right. Not a good idea.

Adrian 

Yeah. You know, use the system as part of a full arm plan. And when we talk about building wealth, we talked about, you know, a big piece of this conversation is going to be the income generation, even though most people don't become millionaires, just by tucking a million dollars away. You know, there's the there's the back end strategy component, but getting solid paying jobs like this, you know, lawyers are paid very well. But there's also you have the list there. Rob, I believe we had firemen, we had nurses,

Rob 

so let me run down it. So this is, so you have to work for a nonprofit or government. And we are looking at so emergency management. So for example, like EMT, you know, that sort of thing. Military Service counts, government, public safety, so cops, firefighters, and such law enforcement, which cops do, but controller reduction of crime or the enforcement of criminal law, public interest law services, this is the attorneys that sort of thing, but legal services provided by an organization that is funded in whole or part by US federal, state, local, tribal, you know, all of those things. Early Childhood Education. So this is not just yeah, teachers, but this is like pre K teachers, daycare, that sort of thing. Again, it can't be it has to be a nonprofit, though, that you work for. It can't be, you know, right. What is it? kindercare? Yeah, you know, one of those that's for profit, public service for individuals with disabilities and the elderly. That's one public health, which includes nurses, nurse practitioners, nurses in a clinical setting, basically, anything with the name of nurse on it is a huge one, but also full time professionals engaged in health care practitioner occupations, and health support, which I'll get to in a second, public education, public library services or school library or other school based services. It also includes a lot of private schools that are nonprofits, but they have to be 501 c three. So that's a big one for educators. But here's an additional piece, and I won't dive into this because you know, our audience, you guys can look at this and go through the, the,

Adrian 

yeah, you'll have to narrow down to your specific band and

Rob 

dig into these Exactly. But you must, you can also be part of a support for, say, a public school, you don't have to be a teacher, you could be on staff as support for that. Yeah. So it'd be an administrative role. Administrative. You could, I mean, technically, you could be on like, facilities, you know, what we, we call it? You know, back in the day, we said, Oh, that was janitor. Yeah. Now, it's facilities management, you know, what have you. But this gets into more of the meat of this, which is actually kind of fun. So what happens if you have that? Typical, we make fun of it. But and we probably shouldn't, because there's value there. But the the degrees that you connect with, would you like fries with that? Or, oh, it's it's barista training? You know? Yeah, the anthropology. Oh, I got a philosophy degree. I mean, I don't know, I don't want to pick on our audience too much. But you guys know, what we're talking about is sociology. You know, just just those different, like, those degrees that are great, most of them tend to be in the liberal arts, most of them tend to be still pretty expensive. A lot of liberal arts colleges. Yeah, nobody's in 100 $200,000 worth of debt. Okay, what does facilities management look like? You know,

Adrian 

in defense of these fields, I think that they are, you know, I'm not gonna go too far in this. But I think that a big piece of this is that these careers are not they're not like job slips, you know, you get a degree as an RN, what are you gonna do? Go be a nurse, you know, and there That isn't what you have to do. But there's very much a defaulting and a funneling for some of these careers. And that's what makes them great choices. For a lot of people. If you go and get an English major, you might have to be more creative or more proactive about where you want your placement to be in the employment world. I definitely wouldn't recommend going a four year degree in some of these. You know what, let's call them yeah, the the barista career paths, you know, that people say that they, you know, all they did is just pay off a student loan for something they never used. That's because it's a it's it's not, it is harder, in its own unique way. And you've just got to prep yourself for that. And unfortunately, what a lot of this, this bigger picture conversation boils down to is, you know, I'm, I never had this conversation with my guidance counselor. I've talked to lots of people who have had the same experience, you know, they say, what do you want to do? What do you Have for a career. But this is a, this is an upper level hack, I'm talking about someone right now who's going to get $100,000 forgiven, right, you know, over a period of 10 years of making $35 payments, and when you factor in the interest, especially, and then look at the fact that this is money that you'd have to pay post taxes, right, you'd have to get taxed on your income, and then make payments on this, and then maybe get a little write off, right for the interest on your tax returns. Right. But in the grand scheme of things, you probably are paying 150 160 70 80,000 by the time you can start chipping into this debt, and certainly at a meaningful rate, right, lots of people carry these this debt for well, more than 10 years, you know, paying off student loans in 10 years is abnormal, right? Because most people do get on the income based repayment, and they stretch them all the way out into their late 30s 40s, whatever it's gonna be even if they went to school right after high school. So again, penny saved is a penny earned. This is a hack for generating with it's all about the net worth needle that we're talking about here. Right? It's a combination of earnings. And these are great jobs. You know, the reason that this exists for these jobs is because they serve the community on the whole, right. And they're necessary jobs, and they're in demand. So blood student loan forgiveness, talk in the news, it exists right now, there's people right now getting their student loans forgiven, right. But it's you have to be deliberate about how you go about getting into your writer.

Rob 

So let's, let's unpack that income based repayment piece. Because in glass, our audiences is googling this and going through it, they probably won't get it.

Adrian 

So

Rob 

the idea is what happens with, you know, somebody, and I'm actually going to use my wife as an example on this one. So my wife's a nurse. And she's been doing this for we're about eight years. And in 2023, she'll be done. And she'll be 42 years old. And she has been a nurse for a little over 10 years. But she was in school for a couple those years. So it doesn't count until you consolidate. And after. There's a lot of hoops to jump through on this. The point is, is smart people do it, you know, and they will work hard to set themselves up. So the payment My wife has roughly like $80,000 she got a graduate degree in nursing at University of Portland, which is not a cheap, yeah, yeah. And she was working through a good part of it. And we paid for a good part of it, but she still had $80,000 worth of debt. Well, eight years later, her payments have been between about $400. And like 550, if she was if she was not doing the income based repayment, which is a program through the Department of Education, and it really gives credit for having kids in the household household size, those different things, your attorney friend did the same thing. If you make a reasonable mid income, my wife, you know, 10 years ago, she started she was making 60, some $1,000 a year as a floor nurse in a in a hospital. That's a nonprofit, Providence, St. Vincent's to be specific, and which is in the Portland metro area. And then now she makes, you know, closer to 100,000, she works like 32 hours a week. And she makes Yeah, 55 $58 an hour by the time you get all of the different differentials and, and different things, she does make a little extra cuz she has a master's degree versus a bachelor's and, and so on. But you put all that together, you think her payment would be a lot because she makes $1,000 a year or close to it. But if you it's based on your net income, not your gross and she we contribute the 90,500 to her retirement accounts. Well, that comes off the top, it's her it's basically the nonprofit equivalent of a 401k. So we maxed that out, we've been maxing that out for a number of years, well, her net pay is net of that. So you contribute your retirement first and that sort of thing. And this is I don't want to veer too far into the lane of you know, the financial planning side. But there's these different things that you do also, her and I have been filing separately, because of my income as a successful business owner was included in her tax return, the payment would be like 2000 a month instead of 550 600, something like that. So we file separately so that my income doesn't affect her income based repayment. So basically, every year she does her tax return her by herself. We have our CPA firm do that. But they she does that by herself, writes off the kids and then does the application which is very generous for someone like her who's filing separately even though she's married. And the payments even now, at $100,000 year close to it. It's like less than 600 bucks. So that's hardly even touching the interest or the principal, much less the interest And in two years, it'll be forgiven. So this is that concept of income based repayment, you've got to work through the the department of education process and their system and all of that sort of thing. Right, there's a way to do it is is my point. And I think I'll leave that there. But the idea is minimize your income. Now, there's repercussions for that. There's some tax ramifications on my side and her side, we're both professionals, in real estate her as a nurse, because we file separately, there's, there's some limitations on what I can do for savings. And actually, that'll be in another episode, where we talk to a CPA and are

Adrian 

finding there's just a ton of layers to unpeel. Right? So that's one thing, you can engage exactly one of these strategies, you don't have to do all these things at once did you figure this whole problem out in one go, she graduated college and you figured out student loan,

Rob 

right,

Adrian 

so take it in steps, you know, don't don't get let yourself get overwhelmed. But especially for our folks out there who are looking at the beginning of their career and thinking potentially about where they or their kids are going to go to school and what their careers look like, as it flushes out, there's lots of stuff, we're not going to run out of demand for nurses firemen, or, you know, teachers, right? These are all if anything, demand is exceeding supplies. So right. Um, you know, you will see examples. This is one of those like economix, one on one kind of, you know, they do the the breakdown, where they go up bill went to college, and Joe didn't, you know, and student loans subtracted. But what if you take that out of there, you know, like a lot of these equations, lean on the idea that student loans are something that you have to pay off, and that you have to carry. And this is, again, just one of my favorite hacks out there, you know, you can get into a great career, you can get into a six figure career, while not having to contribute a huge amount to the student loans. And I love the program, I'm happy to do it, you know, and to be part of the society that forgives this debt, because, again, these are high demand professions, we need these people, right. And just to to drive that point home.

Rob 

A quick google search on like average student loan debt in the United States, for an average student that is a loan borrower in America, it's 30 to 30, over $32,000. And it's, that's a 20%, jump from 2015 16. I mean, 25,000 to $15,000, in outstanding student loan debt, that's a big deal. So, again, you're looking at this big picture, and this is what pulls in for you. And I Adrian is, you know, you uniquely as a lender, helping people, you know, build wealth, creating everyday millionaires in real estate, right? Yeah. And myself as a real estate broker. We're not just sitting in this one little Oh, hey, we'll help you buy a house, it's such a bigger conversation, you have to have that tax piece, you have to have that financial planning, you have to have you know, a certain point, you have to have bookkeeping, you have to have your life insurance, you have to have all of these things. And what ends up happening is, you want to work with professionals in the mortgage in the real estate brokerage world, as realtors that actually have these relationships. That's really frankly, you know, we've talked about this as far as our goals, and in previous episodes, just we want our people and which is our audience, our clients? To be smart to be savvy. Yeah, okay. It's live deliberately. Yeah, exactly. And to be. And granted, this requires discipline, there's a whole bunch of steps, you have to go through this, but,

Adrian 

but you don't have to wake up every morning and apply for student loan forgiveness, you just right, you have to say I'm gonna, I'm gonna step back, and I'm gonna make some bigger level decisions. Exactly, then I can let them ride out,

Rob 

right. And once a year, you're going to go in and do that application and update it and document it and send it in, you're going to do your taxes accordingly. You're going to do these different things, you're going to live smarter, you're going to work smarter, not harder. And you're going to do it because you know, you have a team of professionals that are you know, working with you on this giving you these hacks. You're listening to this podcast, not to build ourselves up because frankly, there's lots of people out there, yeah, that that do this. But you just it's just one of those things. You don't know what you don't know. Until you do, right. So this is one of my favorites. Yeah, this is this is awesome. I'm looking forward to that. There's a number of other dives that we can do in this in further episodes, but this is a fun one. So the the website again, at least that we went to the student aid.gov

Adrian 

and the name of that program,

Rob 

the name the name of the program is p s s F, which is the public service, loan forgiveness. And if you Google that, you will find this. And you'll be able to, you know, go through a whole bunch more details. Obviously, people can reach out contact us. We're happy to walk them through. And but usually by the time they talk to you guys talk to us, right? There's a purpose, but the further ahead that you do this, and you do these different things, you know that the better off you're going to be, this isn't something you do overnight. So yeah,

Adrian 

absolutely. long game right. long game.

Rob 

Yeah. Love it. Thank you, Adrian. This was a fun one. Thank you, audience for your audience. Listen to us drone on about this. But obviously, we're passionate about it. So yeah. Yeah, just keep keep up the good work.

Adrian 

Thank you. Catch you next time if you try. Yeah.

Intro 

Thank you for listening to the get rich, slow podcast. If you like what you learn, please subscribe. So we can grow wealth for even more families.

How to Make Money by Saving Money

Welcome back future millionaires. Adrian Schermer and Rob Delavan here. Today, we'd like to jump into a topic that we've had some back and forth with comments online, mostly talking about people who are entering this process at a young age.

The best time to start financial planning was yesterday. The second-best time is now!

The bigger picture of what we've talked a lot about is earnings. We've talked about what you can accomplish with a certain level of earnings. But, one of the big caveats to that is obviously if you've got a load of debt, what do you do with that? How do you attack that? Whether it's student loans, it's credit cards, it's an auto loan? How do you offset the damage that that can be doing to your total net income?

That's what we're going to jump into a little bit here today. You've seen this before, too, right? I mean, we get customers who make very little per year, and they qualify for a surprisingly large purchase price. And then we have the total flip side, which is a surprisingly large amount of people who make household income, well into the six-figure range, but struggle with debt. The world we live in right now is tough. There is a lot of encouragement to not just hustle but show how well you're doing while you're hustling. Leasing a brand-new car while you're young, or having something to show off, or even avoiding student loan debt, which is one of the funny ones.

It's just it's an interesting concept. We talked before in a different episode about making $40,000 a year as the assistant manager of a fast food restaurant. They started at $12/hr. and a year or two later, they're making $20 or more, which is totally doable with discipline and hard work. We just pick on fast food because fast food has a stigma, right? I've helped plenty of fast food managers buy homes.

There are many industries this applies to. It's all part of that living deliberately. I mean, you got to find a career that can pay at this rate, that's going to be a part of the process of making your way to becoming a millionaire. So, one of the things that we were talking about off camera was this concept of making $30K-$50K a year, or maybe dual income household. Regardless, you are out there grinding, and this avatar is of somebody who's probably mid to late 20s, maybe early 30s just starting out. Let’s talk about two or three examples that they could be doing to literally make $5-$15 more per hour?

A Penny Earned Is A Penny Saved

It’s not just about money in, obviously at the forefront it can be. If you can increase the amount of money that you make per year, you will increase your wealth. That's one way to move the ball forward. But the other way to move the ball forward, is building equity from owning a home. So, what are some other ways if you don’t own a home?

“Choose your expenses and make conscious choices about your expenses.”

We get people who come out of college, they get a good paying job, or maybe they get out of high school, and they get into a good job that pays $20 plus an hour. One of the first things they do is they go and rent an apartment by themselves. While that is great, you are giving up the money that you save when you have a roommate.

My wife and I, we were both working full time jobs and making good money. Yet, we didn't get a house on our own, because we were in our 20s. That is one of the key times that you can really save. Push off having the house to yourself, the big yard, and the picket fence. Scale down your living and do what people all over the world do. Cohabitation is a pretty normal thing within human society.

So, if you've got a roommate, your roommates paying you $700 a month, that's a good chunk of change. $700 a month comes out to $8,400 per year. Except it's even more than that because this is extra money in your pocket. That's including rent for the room, now you guys are splitting the internet, which is normally a cost that you have to absorb all by yourself, if you lie to yourself, utilities, keeping a fridge on all cost about the same for twice as many people. There's lots of things that scale, and they don't just double in terms of the bill cost.

“Hey there Spender! You should be a saver instead.”

Most of the people in this is this bracket are going to have some credit card debt, especially if you're coming out of college. A lot of people end up stacking quite a bit of credit card debt, and credit card is something that upsets me deeply.  I had terrible credit, learn from me, moving to an installment loan, not only brings the interest rate on that down into often 10% range, which saves you $2,000 a year as you're chipping away at that debt. But it's amplified, because you're taking it out of a revolving debt, where it's counting towards your utilization which has a negative impact on your credit score. So, when you move it over to installment, I personally paid almost nothing off. I went from revolving debts to installment debts and my score jumped by over 100 points. right. Then I went back and revisited those loans, and then they gave me an even lower interest rate. It can be dangerous cycle though, because if you go and you fill that card back up, you’re going to be in trouble. But if you do that, if you have the $10,000 debt already anyway, do the smart thing and get a roommate. Make an extra $12,000. Then go after your debt and go to the installment loan. Now that $12k becomes $14k right? One roommate could pay off $10,000 worth of debt per year for you. I'm not saying that this is a solve all for everyone's financial problems. But there's a lot of people who I talked to in this boat and they spend more money than they need too getting out of debt.

It’s all about the intentional living concept

When you're doing something, you're going above and beyond, especially at these lower tier jobs. Start tracking everything you do, it shows that you're that type of person, you have that type of mindset. Don't wait for someone above you to give you the reward, write it all down. Then when you get to your review, say I did X, Y and Z. If they don't want to recognize that effort, go find someone else who will. Yeah. The next person you show that will recognize that, every time.

“Credit Card Debt Is Depressing.”

These companies are stealing money from people. If you owe $10,000 to Visa, at a 20% rate, they are taking $2,000 of your money every year compared to what you could do at a credit union, right? It drives me insane to see that money just washed down the drain. Let’s say you go buy a house at $250,000 with 3% down, that's only $7,500. That's a roommate for less than a year, not even a year's worth a roommate, you can have 3% down on $250,000 for the home. Now, you're not going to buy in the center of Portland, but you can buy in a lot of rural areas for that much money. We get 4% appreciation on average real estate is kind of like a rough ballpark number, right? So how much appreciation would you get on $250,000? 10 years later, you're at 30-40%? Right? 4% of $250,000 is $1,000. So now you're making $10,000 more a year, and your roommates helping you save another $10,000 plus per year. It's now post tax income and here you are with a $20,000 raise and driving a used car that's three years old.

At the end of the day, there’s no one size fits all

We encourage you to actually look at possibilities in your life and think consciously about the big things that can happen for you. This doesn't just happen to people who have wealth, they had to sit down and make the conscious decision. When you have a plan, it can be a burden off your back. I talk to a lot of people who get stressed about money, and they wake up every morning with it bouncing in the back of their brain. It's hard to shut off. Once you've got a plan, you don't have to worry about that stuff anymore. It doesn’t mean your problems disappear but now you can say I have a plan. However, life still happens. Emergency medical bills, the birth of a kid that you might not have planned for or lose your job. If you make this conscious decision to stay on these roads, and stay focused it'll get easier and easier to get back on track to creating wealth.

If you like what you learned, please subscribe and review to The Get Rich Slow Podcast so we can grow wealth for even more families.

See you next time millionaires.

1. Loans For Vets

Intro  0:02 

Welcome to the get-rich, slow podcast. This is the stuff our expert guests and we 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  0:42 

Hello, future millionaires, and welcome back to the get-rich, slow podcast. We are your co-hosts, Adrian Schermer and Rob Delevan. How's it going today, Rob?

Rob  0:51 

Wonderful. Thank you for asking.

Adrian  0:54 

Today, we want to take some time to talk about a specific type of loan product; we're going to take some time to kind of park on different ones. But we spend a lot of time talking about conventional. We have a planned future episode for USDA Rural loans; look out for that popping up. But today, I want to talk about not wanting to bite my tongue because I don't want to give too much bias. But this is truly my favorite type of loan to do. Okay, when I get a client who says yes to the question, Are you a veteran? Yes, the first thing out of my mouth is to thank you so much for your service. Right. The second thing is we are about to have some fun, because short of a few minor, you know, cons to all the pros, that the scale is tipped deeply heavy in the pro side and I grew up with my grandfather held the highest enlisted rank in the Air Force. He was a chief master sergeant in the Air Force, and as a mechanic, I have a lot of pride in the military and what they accomplished for this country. I know there are things that people have to say that are negative, but those that serve to make a choice to do so. And I think that there's a lot of good that has been done. And that a lot of good comes back out of it too.

I talked to veterans who feel like, you know, the military was a stepping stone in their lives. And of, unfortunately, the negatives that we hear when we talk about the military from military members is that the VA tends to drop the ball in certain areas. And you know, you know, people who work at the VA hospital. Right? Right. And you know that there are some things that I think we could do better as a country, but there are some programs that are very, very good. And one of the best ones has to be the VA home loan, the

Rob  2:46 

VA loan. So before we jump into more of the particulars of the VA loan, let's just spend a minute or two on the fact that you aren't in. I believe this has been the case for you. But for myself, I have family members. I have close friends who have all served. And they were just a lot of them. Almost all of them have this story of Amen. You know, I was 1819 years old, grew up, didn't know what to do, and made that choice went into the military service for, you know, for six years. Typically now it's six, popped out on the other side as like just ask kickers, these, they just go through they are production specialists in whatever they do. It doesn't matter what they did, typically, in the military. It's more about the attitude and the giddy-up that is provided going through that life-altering situation. They're rarely considered themselves, you know, the victimhood mentality, these guys are just they go out there, and they kick butt. And therefore, they're some of my favorite people, as friends and family members, but also as clients because they're demanding, they know what they want. They want results, all of those sorts of things. They want to know what's going on; they will ask questions. You see, they're the best type of college students, right, the 23, 24-year-old, that just blast through college, it's been paid for it usually through the GI bills and that sort of thing. But it's just that they're fun. They're direct people. They're not the wilt under pressure type of person. These are, and frankly, they're also incredible referral partners because they network, and you start working with one vet, and you end up working with, you know, that vets, friends, family, everybody else, and I'm there just incredible if you take care of them,

Adrian  4:42 

if you take care of them. I will say that one of the things that I've noticed the military gives us people, in my personal experience, is the ability to recognize hard work when you see it. There's a lot of respect that is gained by people who are willing to make things happen, and that are willing to do so only with the knowledge about it you're not, you know, I can only imagine in training for a battlefield, you can't just kind of know what you're doing, you either do or you don't, or you don't do that task, they're not going to have you, you know, they're going to hand you a rocket launcher, if you haven't been trained on it, you know. Hence, there's a lot of that concept of, you know, little skill set with immense expertise down that bandwidth. And I think that that's, they recognize it out in the world, I won't tell people how to, you know, price a house, you won't tell people how to apply for, you know, qualify for a loan, we know just about enough to push each other. Right? So you know, that's, that's kind of my, my, my expertise, better, I get you with the right person, right, and try to be a jack of all trades, master of none.

Rob  5:50 

Right. And I love that about, you know, vets, they're just, they're just, generally speaking, incredible people to work with. So the quick rundown, let me run you down from a real estate, you know, the brokerage side? Yeah, of what I know about a VA loan. And I'll start with all the positives, and then we'll well, we'll discuss it, and then we'll drop over to the negatives. The positive is the number one thing it's a 100% loan, that vets can qualify as long as they have finished their service and been honorably discharged. Yeah. So what we're talking about is okay, you have a $550,000 purchase in the Portland metro area; that's roughly the limit of what a conventional VA loan is; you can literally make an offer for $550,000 if you can get into a contract with that. You will have zero down payments and no mortgage insurance, which is incredible. You also will pay the VA will discount and subsidize basically, depending on your service level, yours, if there is a disability, different things like that, they will also subsidize and minimize your cost for escrow title fees, other things like that, closing costs, and so on. The highest tier of like a disabled vet can pay almost no closing costs, and it's subsidized through the VA system, which is pretty cool. You know, the so zero down other than that, it's a regular loan, fixed rate, 30 years, typical interest rates, sometimes it's a little bit less because they have their interest rate. So it's often a little bit less if you correct me if I'm wrong. And it's no more difficult underwriting-wise for the person than any other loan. Now, the property's a little different issue. But for the person, it's typically, you know, no different. And that's in there. Okay, so, poke holes into that, and, and flesh the rest of that out.

Adrian  8:07 

Yes, most of what you're saying is true. Some of the complications that come up are the degree of service someone has. The VA does charge an upfront funding fee. This is the portion where there's room for a gap. So the program's first use can be up to 2.3% of the loan amount if the loan is 100% or down to 95% of the home's value. Some tears go down from there. But this is all weighted by your entitlement as a veteran, so you have your DD 214. If you've exited service, or we have a few different other service documents that we use, we submit these back to the VA, which is confusing but always makes sense. I love

Rob  8:47 

Yes, my eyes, my eyes just glazed over your DD. What?

Adrian  8:52 

What am I, my just statement of service, a history of what you did while you served? Whatever you did, one of my favorite things is I'm always like, yeah, I need you to give me this form from the VA. And then I'm going to go to the VA with that form. And then they're going to give me another form. And they go, Yeah, that makes sense. And everyone outside is always just like, what do you what? Why don't you just get that thing right away? And they're like, No, that's how it works. And there's logic to it; I swear to you, a lot of it is private security. You know, there's a famous quote out there that the American military is so hard to fight against because they even they don't know what they're doing. Which is it's a joke, and it's not a joke. It's, you know, you can't have everything in one place. Ease of Access is not, you know, that's a whole aside, but either way, there's a bit of a process upfront, but we find out eligibility, and you touched on it a little bit. You got one extreme which is someone who maybe was in for only two years, saw little to no active duty, maybe no disability to speak up or anything like that. The mildest end of just getting qualified for this is going to pay a greater funding fee, But it's added to the loan amount. So the loan amount is 100. And let's say, in this case, 102.3% of what you're buying the house for that 2.3% goes to VA, though, so you don't get to use that for your closing costs. But we can chew into why you can get credit towards closing. On the other extreme end would be, yeah, a disabled vet, I've worked with tons of disabled vets, and they end up getting the full entitlement, which means 0% is added on. And the VA loan can even be used multiple times. And there are different ways that that can apply. If you are selling and buying, you can definitely do that. That's really, really easy. But in some cases, you can use only part of that entitlement. And then you can use it again, we have one vet who is under contract right now, more than a third house, but they are gonna go conventional on that. But those first two, they were able to both squeeze under the window of the

Rob  10:50 

the limit was 550, basically, and he had a $200,000 loan on one and a $300,000 loan on another.

Adrian  10:56 

Yeah, he basically filled out and got full use out of it; you can only use it on primary properties, yep, for purchase. But then once you're in that first one, if you want to go to the second one, this is what this Fed did, you can reuse it and still keep the old VA loan; you mentioned rates, the rates are the best rates a 30 year fixed VA loan cost for cost will be at a lower rate than USDA, FHA or conventional lending. By a stretch, it's a decent stretch. And usually, what that can play in order, I would say about a quarter to half a percent below what a conventional loan would be, it's much more forgiving to for lower credit scores, lower credit scores are usually brutal, if you got a 620 score, you wanna get a conventional loan, you might pay four plus percent right now, where someone with an 800 score plays three 2.99. Right, to give you an idea, this is relative to right now, the day that I'm saying this, it's going to shift by the time this even hits the air, but the VA loan is still going to be down in the high twos at this point. Right. So which is incredible, cool, just a little spread very forgiving in that respect, and it makes that loan easier to qualify for. And it does mean that you can utilize the tiered pricing system, so you get a higher rate, you get a credit towards your closing costs, you get a lower rate, and you can pay for that lower rate, this applies to all those loan types I just said, but in a VA loan, since that baseline is so low to start with, if you go up and you get to 3.25, you should have a credit. Using these baselines that I'm using right now, that's gonna move every day, your results, your mileage may vary. But all that said, Yeah, that makes it a great point of entry; the VA does do a couple of extra things that can sometimes make it tricky. If you're a real red line client if you are truly trying to get a loan that is at the highest percentage of your gross income, the VA loans are also very flexible. They're one of the most, maybe the most flexible systems; I've seen approvals up into the high or into the mid 50% of gross income.

Rob  12:58 

I make 10,000 a month; they'll qualify me for all my debt, maybe as high as 5500.

Adrian  13:04 

Yeah. Which is I have seen it's not the baseline, it is trickier. You need compensating factors. And that is a piece of another longer conversation that really, you know, like a lot of things here, right? We always talked about these are the general concepts, you need to find out for yourself. But if you're a veteran out there listening right now, you've you've got to have this conversation with someone because the power that you have borrow at a crazy low rate, if you're gonna live somewhere anyway. Yes, owning gives you that power, you can build equity, you know, the community, in my mind owes you a debt of gratitude. And this is one of the most effective ways that it is paid back. And it is a win across the board. Yes. So that sounding fee can vary a little bit that gets tacked on the other portion. And I'm this is one of these super long rabbit holes is that the VA wants to ensure that based on cost of living and expected costs of maintenance for your house, you can live there and afford it. It's I have a very small handful of times that I had this be an issue for vets. And one of the examples was I had a vet who was buying a house that was unusually large, it was something like 3500 square feet. And they were pretty tight with their ratios. They had a few kids as well, they will factor in the cost of having children in your house is the only loan type that does that. There is no load for how many people are in your house with a conventional loan. The only of the ones I'm talking about, I'm sure there's some weird lending out there, you know, again, disclosures here but the VA normally this calculation does factor How many members are in the household as well, which is unusual for these type of lending products. But the big thing is they want to make sure the vets can afford to live here. They can afford to eat they can afford to feed their family with medical costs they can afford to maintain the property there is a per square foot measurement in there to ensure that there is enough money For the expected maintenance on a 3500 square foot home, because if I have two homes that are the same price, one's 3500 square feet, and the other one is 1100. Obviously, I'm going to have different costs of maintenance. conventional lending doesn't dip into that for lots of reasons that we could rabbit hole. But VA does. And this is where it's a catch 22. But I really like the VA loans for this, because there's a lot of practical thinking that goes into, let's make sure we never default on VA loans, right? Let's make sure these people are safe beyond just Can they afford this, and then it's up to them if they want to eat ramen every day. And that's where we kind of dip into what you mentioned earlier, right? The appraisals? Yes,

Rob  15:45 

so there is no stigma from a broker side, or selling a house, you get offers exactly, I get five offers. And it's all let's say it's a $500,000 range, right? Right in there, we get five different offers or two offers or you know, whatever the case may be, or maybe 20, depending on the day in this market and what it is, but it's a $500,000 property. And we have somebody with 20% down conventional, right, just straightforward. And then we have a well, and then we have a VA that zero down with, you know, normal inspections, and you know, everything else is the same. But it's a VA with zero down. So part of me would say, Well, let's look closely at this VA person because they've served and, you know, maybe there's some intangibles that because we don't know the quality of the buyer, if they're flaky, if they're solid, how graded that sort of thing. But we do know that vets, frankly, are less, in general, those negative things. So let's look at but there is a downside to the seller. And the seller. The downside is the VA will look at they have to do a basically a VA approved pest and dry rot appraisal above and beyond that stamped and approved by the VA bureaucracy above and beyond a regular appraisal. So a couple of things. Number one, it's slightly more expensive, was that

Adrian  17:12 

they have their own appraisers as well. Yeah, exactly. And VA loan, we are ordering it through the VA, right, it is a little clunky of a process, I will be transparent about that.

Rob  17:21 

And they have to be they have to be licensed with the VA law. So it's another license on top of a normal appraisal license. And then the last piece is just that it's it's a little bit stricter. So those appraisers instead of maybe poking their head down into the crawlspace, they may actually usually they don't, but they can go down into the crawlspace and make sure there's not

Adrian  17:46 

1. That's the crawlspace cool. Right. FHA USDA heads poked flashlight. Yep. Va Va,

Rob  17:54 

he might drop in

Adrian  17:56 

on this. No problem. I'll get under there don't sweat.

Rob  17:59 

Exactly. And same thing in an attic. And, you know, in generally attics and crawl spaces, it's mold, mildew, water, creepy crawlies, you know, just different things like that.

Adrian  18:11 

So now we're gonna ask that question, is that a bad thing? Well,

Rob  18:15 

and that's the piece, right? Is it a bad thing? Not necessarily. Now, for a seller, a seller is going out? Well, if we passed it, say it was competitive, and there was some water in the cross, yes. Right. And the buyer said, I'll take that on, because I want the house and it's worth it. The buyer was VA, it's going to get called out. So the seller is going to have to fix that. Right. But via the by the appraiser versus in a conventional situation, most likely, it's still going to get approved, and so on. So there's limited scenarios for less than ideal condition properties, basically, properties that have more long term, deferred maintenance, that will, you know, you might cost the seller a little bit more to work with a VA buyer. If you have a turnkey property, and it's ready to go. And there's there's no deferred maintenance. This is my personal opinion. But if everything else is regular, and it's turnkey, and my client is on board with it, I'll say if it's exactly the same go with a VA buyer all day long, just if for no other reason that they served our country. But, you know, it's it's still a case by case situation. And I will talk through with my client as you will also, because we've done that many, many times with clients that we've served together, the pros and cons of this. Exactly. So that's the negative. I would I would leave is there any other negatives, Adrian that that other than just that appraisal issue?

Adrian  19:46 

It's it's the so for the buyer, it's the funding fee, and then it's also this hypothetical weakness of offer, and just what is frankly plain ignorance I talked to within the last few years I talked to a woman who had been in real estate for over 20 years, and it was just because she remembered this from the past, there was a time when the seller had to pay some fees for VA loans, which sounds insane because it is right. Why would you want to create a bias against veterans? If you can avoid it, I totally understand checking for mold and mildew is a win for everybody in my book, I, and frankly, the gap has shrunk as well. So this is part of that mistake here. Conventional Loan appraisal requirements have gotten harsher, and VHF stayed the same. And same with FHA, the gap is much narrower than I think it ever has been. And that's, and that's because the reality is, if you don't check the crawlspace, and the, you know, this is like walking around a car, and then never opening the door to me, you know, you got to look in these places, where you got to look under the body, you got to look for the frame rust or whatever, you know, this is where it's easy to do a touch up job and patch and cover problems. Looking underneath is often, you know, a more telling story. So on just like a personal level, I'm for it. But I understand why sellers are. I don't know, and I guess it's like, you know if you got pulled over by a cop, you got nothing to hide, you haven't broken the law, I don't really want to talk to a cop that was I wanted to figure out some reason to charge me. So I think that's where a lot of that fear comes from. It's just like, well, what if I don't know about something down? Right? What if I, you know, I'm not trying to lie, but I'm also not trying to stir up an issue that I didn't know existed and wouldn't have been a problem immediately for the buyer? So

Rob  21:31 

overall, it's a minimal hindrance. Yeah, you know, from a brokerage. But you know, I will admit, I'm biased, in that I'm pro, you know, pro vet, and, and just want to give them as much opportunity as possible. The last thing I want to cover on this topic is that there is a product; we don't need to go into the ins and outs of it. But traditionally, VA was limited to, you know, in our area, roughly 550 in the Portland metro, but there is a product that is VA that goes to at least a million bucks. Is that right? Yeah, you

Adrian  22:04 

can get up into the seven-figure range pretty quickly. I know my company is offering a million dollar, at least right now. And it's called high balance; the rate is higher, but not by much. When you compare it to jumbo rates, it's very reasonable. And it's it's up to 100% financing, and VA loans, like many other loan products, this isn't unique to VA. But we're gonna chew into this in a later episode where we talk about multi unit properties in depth. But let's say you've got a duplex and the other side rents out for 1000 bucks, we can use 75% of that we take 25% out for assumed vacancy and repairs. And, you know, if the mortgage payments are going to be $2,000, you now only have to qualify for a $1,250 loan payment, because we're going to subtract 75% of the market rent of that extra unit. So and this scales up to four-unit properties. So while those are expensive, yes, you could, in theory, get a million dollar property on a VA loan that has two or three other units that you're going to be renting out and end up in a place where other people are essentially paying your mortgage you're taking on the risk. This is a valuable service, we need someone to own these buildings. But the risk is spread because you have more doors to rent to. And so this is a this is an idea that, you know, this is one of the things I love working with Rob, because we flesh this out, we spent hours. Yes, looking at example products playing the game and going, what would it look like if someone did do this, and the numbers work pretty damn well. And this is, especially if you're a single vet, I think we we talked about, you know, not a lot of married couples necessarily want to get into one of four units for whatever reason. There's some psychology there probably too. But if it's, you know, your first property or second property and you're selling it to equity already, you're rolling it into the second property, not the wildest idea to get something that's a multi unit. If you're not gonna live there forever, and that you're buying thinking this is going to be an investment property. I'm buying this with the intention of moving out and turning into a rental. Multi-units are a great way to increase the number of doors which there's risk as a rent

Rob  24:16 

ratable Hack, life hack for vets. And frankly, I'm blown away the more vets don't don't put this into place, but it's just it's just kind of a it's a weird thing that you'd have to wrap your head around. It's also one of those things that there's not a whole lot of properties that are 234 Plex and are on the hunt. It's definitely the biggest single reason I think where people don't do it more often is because they're just not that common of a property. And that's where you and I ran into with some clients we ran into. In theory, it was all good, but actually finding the property that would actually work. We haven't been able to do it, but man, I can't wait until we find that perfect situation and and get it done. So let's end it there. Adrian, I appreciate all the information. I've learned all

Adrian  25:05 

out to all vets, oh, your veteran friends, tell them thank you going to house right now, we have worked with, you know, a number of groups trying to even just get in contact with more vets spread this knowledge, please, if you know someone, let them know, even if you don't send them our way, just let them know that they should really look into this, run the numbers and see if it makes sense. No one's gonna force their hand. But when you look at the numbers, and you play it out, it does make a lot of sense. And I've just known a lot of vets who, yeah, they built that equity out of this, this VA loan without having to take money out of pocket. Initially, you know, and and eventually build something that they can really lean on. And if you're looking to help vets, and you want to continue along this idea, I'd love to recommend you over to a group that we have partnered with in the past, which is do good Multnomah. Do good is a local charity in the Portland area, they specialize in helping veterans. They've got some great, I've met a ton of their staff. They're just awesome, compassionate people. They do a lot of unique things. They are a lot more flexible with everything from folks who have dogs, which, if you've ever tried to help, you know, in the homeless situation, that's one of these things, a lot of people with dogs, for example, and a lot of vets have dogs, for good reason for support animals that can't take them with them. That was one of the big things they pushed for. And then also, you know, taking in people who may be turned away for other reasons, I'm not going to get too far into it. But you know, there are there are facilities that closed doors to people who are basically not in the right, the right mindset and digital nomad does a great job of providing resources to people that are unique to that and the the unique type of problems that seem to be common within those communities. So check out do good Multnomah. If you want to support an awesome local charity that's doing good things. And if you know Yvette, tell them to look into owning a home. Yes. And

Rob  26:59 

and thank them and just love on them. So absolutely. It's awesome. All right. Thank you, Adrienne.

Adrian  27:05 

Thank you all so much for your time today. We'll catch you next week on the get rich slow podcast. Have fun out there. Thank you.

Intro  27:11 

Bye bye. 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.

Home Series 5 of 8

Adrian   00:02

Hello future millionaires and welcome back to the get rich slow podcast. We're your hosts, Adrian Shermer, Rob Delavan and Lance Johnson. Good morning, gentlemen.

Rob Delavan   00:11

Good morning, Lon.

Lance Johnson   00:15

I've been called a lot of different names but not Lon.

Rob Delavan   00:18

Let's just say Mr. Brilliant at the basics, not Mr. Late to lunch Lon.

Adrian   00:27

This is part five and an eight part series on the home buying process. We're going to talk about both ends of the spectrum here and Rob, let's start off with you. I'm really excited about your news.

Rob Delavan   00:39

So a quick success story for you guys is I actually sold a personal house in the last week and it's one of those things that you know clients and prospective folks and that sort of thing when real estate brokers start selling houses, the markets hot. So, we could dig into that on a whole another episode. But it was a nice episode. I mean, it was a nice situation where hot market and it was the right move.

Lance Johnson   01:07

Not only a real estate move, but it was also kind of a tax move to really kind of discuss. So, it's a good story that we can uncover some time.

Rob Delavan   01:19

Yeah, tax and frankly, it was financial planning just as much. So, there's a lot of moving parts on that one. So, we can unpack, but it was a success, sold, done.

Lance Johnson   01:34

So, upcoming events that are coming, we have the sip and mingle, that's at our legacy legal office on April 22, between 4 and 6 so people that want to come bring a friend or I think we can host about 75 people, I think there's about 50. So, we have some room to have, just let us know that you're coming, get on our website, ROI-fa.com/events.

Rob Delavan   02:03

Awesome, that'll be a fun one.

Adrian   02:09

If you guys want to find us online, you can jump on the podcast website, the getrichslowpodcast.com. It's got links to our events site, to our individual businesses sites, you can find us on there and you can contact us if you have want more information after this episode and about this episode, today, we're going to be discussing financing the home purchase based on some statistics, what we're pulling from again, we love using this as a source because it's got a wide range of information. It's very accurate the National Association of Realtors, this particular stat, we're going to be getting data from the July 2020 to June 2021. That's the latest release from them. The information provided gives us an understanding from a consumer level of the trends that are transpiring and that's really what we're going to look at zoom out of our own little world and look at big data.

Rob Delavan   03:05

Okay, so the first question, Lance, want to throw this one up to you is based on the statistics from the NAR, which is the association Realtors report that we've discussed already and by the way that will be in the show notes and disclosures and so forth for reference purposes. 29% of buyers said that saving for a down payment was the most difficult step in the process. So, just about a third of people, how can you help clients be more prepared for home purchasing?

Lance Johnson   03:41

So, that's a really good question. There are a lot of different answers to this. So, I'm going to kind of go through a couple strategies and so, it depends on the client, obviously. So, let's use an example of a Nike Intel client Columbia where they have an ESPP and some are issues or non-qualified stock options. So, when those best or they're in a position where the clients own them, a lot of times they just stay in a brokerage account that or an account with the company that works with a custodial account and they don't really have the ability to access and a lot of them don't want to sell those shares, right because there's tax well, you can move them to a brokerage account, get a margin, which is a margin loan account, but it's kind of like a HELOC to house ban you could leverage without selling to put the down payment, especially if your cash flow is good. So, a lot of these strategies I'm going to talk about are always going to be brought back to cash flow taxes and financial planning because we will prepare clients on how they would pay off that down payment or that leverage, people that have dual income earners, they both have 401K is most 401K is have loaning privileges up to 50,000 a piece, right? There are some things and not every bank, not every broker has this ability, but you can do and we want to try to get 80% down and so you can do 80% down with a little bit of leverage...

Rob Delavan   05:30

You mean 20% down, right?

Lance Johnson   05:31

Right, [Inaudible 05:36] if you can come up with that short term 20%, you're gonna get a better interest rate than if you try to do an 80-10-10 or an 80-15-5 and Adrian knows more about this, but not every broker can do, has that ability and so that, sometimes you get led in a direction that and so or you just put 5% down, but then you're paying mortgage insurance? Well and so you kind of have to look outside the box a little bit and it depends on if you're moving to the next home and you're going to make your current home or rental. So, before you put it up for market of work, put it up for rental, go get that home equity line of credit on your existing house. So, there's a lot of different ways that you can come up with things to, I don't want to say game the system, but play the system that gives you the best interest rate, which is what our job is, what Adrian's job is how do you get the loan to qualify but how do you prepare for these and then at the end of the day, we have to look at cash flow to make sure that you're not over leveraging, like happened in 0607 that you do, what would happen if you lost a job, do you have good reserves?

Adrian   07:03

I use that same term too and it's probably a misnomer, game the system, but it's just playing by the rules and you know, once you know the rules, you should take advantage of what works in your favor and you mentioned margin loans, we also have 401K loans, I see those two, that's kind of, in a way, a similar product, for lending purposes, in most products in your qualified mortgages, products, your conventional loans and your normal stuff. You don't have to count the payment on that, if there is one against your, it is part of your debt to income ratio. So, that can be a really cool way to utilize pulling money without really pulling it out of your investments and getting the benefit on both sides.

Lance Johnson   07:48

Yeah, and then there's other things where sometimes you want to get that cash in your checking and savings, two months in advance of getting qualified. So, a lot of times, that doesn't happen. So, sometimes just getting everything in order, knowing where you're going to be, finding out what would happen if one of you lost your jobs, those are all important things so that people don't get leveraged and you don't have 07 happening again and that's very important to us as financial advisors. We don't want any clients to have to file bankruptcy so that's not a good play.

Rob Delavan   08:27

And I mean, I guess what I'm really hearing from both of you on this is the key word here is prepare and this is something that you want a takeoff point. It's not hey, guess what I was thinking, Lance I'm gonna buy a house tomorrow, hey, Adrian, same thing? No, give yourself some runway.

Lance Johnson   08:50

I think you're gonna buy a house in June, you start planning January, some people don't really think about it until April comes along after-tax season and you can scramble to get things done, but it's, it's not ideal. So, it's a lot harder. So, Adrian, how do you advise your clients to prepare for the costs associated with financing a home purchase, can you comment on that?

Adrian   09:18

Absolutely, of course, we do a lot of preparation for these episodes and this is one that I had to chew on for quite a while, like most of our answers, it's a your mileage may vary thing and it really depends on each client's individual needs. But what a lot of people don't remember is that there are closing costs associated with a home loan and in a lot, you know this is a national podcast, so we have to appreciate that people are in areas that have very different taxes. I used to write loans nationally when I worked for one of the major national banks and I started in this industry and New York, for example, very high taxes. Taxes are a huge chunk of the closing costs because you're paying Paying the seller for the remainder of taxes for that tax year that they had paid forward when they paid and then you're earmarking enough funds typically in an account your account for taxes and insurance to make sure you've got enough in there your escrow account. So, in the Portland market where we have especially right in the metro where half million and up homes are not uncommon, a lot of times that's a $10,000 amount of cash that I'll recommend, because I like to typically overestimate but your mileage is gonna vary a lot.

You've got to run the math for what you're looking for and as Lance alluded to down payment is another huge factor and I have clients where we sometimes play with different ideas, Lance, I think especially you're working with as a financial advisor, your typical client has a bit more cash and reserves or they might be going for that second home rather than that first time homebuyer and that answer is just gonna be very different for each person and you even have the ability, not a lot of people know this. But after your offer is accepted, you can change the terms as soon as we come in with a larger down payment, but then midstream and say midstream, but really, in that first week, you want to kind of lock in this sort of stuff because you won't have too much movement beneath your feet but sometimes we explore those options. Another great example is people who want to improve a home, if you buy a home, especially one that's got, you're going to expand the footprint of the house, you're gonna make some sort of major renovations, you might want to have more of that cash free, so you go with a lower down payment and you're going to be paying that penalty of having the mortgage insurance on their short term.

But mortgage insurance can be cancelled and again, even sooner than it normally can. The turn times on that reduce when you make major improvements to the home that you can document. So, again, looking at the big picture and just depends on how you want to play the game. Lance again, though, very right, many people, especially when it's not their first home and they've got more capital, or they've got equity, that they're rolling from the home that they're selling, they're going from the starter to the we're going to raise our family home, then hitting that 20% mark has a lot of advantages, not having to worry about mortgage insurance and when that's going to roll off or what the market is going to do and how long it's going to take.

Rob Delavan   12:19

And you mentioned taxes and of course different states, that primarily for closing cost is property taxes to be very specific.

Adrian   12:31

We just rolled off our big kick with Sue on our last episode series. So, property taxes, homeowners’ insurance too, you know, we have people who grab coastal homes, the insurance can be much higher than, I'm in a subdivision over here, I pay less than 400 bucks a year and insurance because I can see the emergency room for my window over here. If you got a place on the coast and it's got a pool on it, you might pay 10 times what I'm paying. So, you've got to know for your specific property, how these factors are going to run in.

Lance Johnson   13:02

Yeah, when I look at your situation in a cost we refer to as deeming the system I kind of refer to is like, I'm ready to show up and I want to know if I'm playing hockey or football, I want to know what the right equipment is and you don't want to show up with hockey skates and you're gonna play football or vice versa. So, gaming is just planning. So, gaming is really referred to when you're kind of trying to strategize and backfill and you're kind of scrambling, preparation and planning is, hey, I'm the ideal outcome based on a certain set of circumstances and I'm just best utilizing the resources I have available to give me the best outcome on a product.

Rob Delavan   13:55

And I would say that's probably the biggest difference in working with someone who's typically has experience in a track record. They're buying a home and they've been working with a financial advising team for a while versus it's the same thing of what you're creating is that runway, that plan, you're really actually working towards a goal and putting a piece of that ownership that move up that move down whatever it is that you're doing. All of those things are taken into account well ahead of time with somebody who's been working with financial...

Lance Johnson   14:33

One thing is, I mean, so many, it's a seller's market. So, you know, sometimes you have to buy a new home remodel it, there's not that many contingent loans nowadays with multiple homest. So, what ends up happening is you got to get all that in place and kind of figure out and then what happens when things go south, are you prepared? Do you have a backup or served? In my 30 years I've only had two clients go into foreclosure and unfortunately, they were real estate agents and because they got over leveraged because they believe that real estate's the only way you can make money but real estate's great, but it's hard to get money out when everything goes south. So, preparation and planning is always helpful is nothing worse than watching a client really fret over and reduce their savings and they're travelling their lifestyle because their house poor, that's an awful way to go. It's just too stressful. So, we try to prevent those things.

Lance Johnson   14:51

All right, Rob, I want to pull you in as well. According to the National Association of Realtors, buyers continue to see purchasing a home as a good financial investment. How do you educate your buyers along the way to make sure that they are getting the best bang for buck?

Rob Delavan   16:05

Well, this is frankly, it's an easy one, do a good job in the purchase and you get into a price point where you know you're setting yourself up for time. That's kind of the canned response; I want to dig into it a little bit more than that. According to the 2021 highlights, which edits page 9 and it's under financing the home purchase. It specifically says buyers continue to see purchasing a home as a good financial investment. 86% reported that they view that home purchase as a good investment 86% this will be documented below and folks are saying that having a home is part of what they think is being a positive thing for building wealth over time. So, I can't argue with 86% of people. What I can do is basically set them up as well as possible in the actual purchase and part of that is everything we've talked about before on this episode, which is no the numbers have a plan, don't get yourself into a house poor situation. Know what just because you can't afford it doesn't mean you should all have these conversations with the financial advising the tax side, the lending side, so forth, that's the biggest piece of education upfront of okay, know what you're getting into, then the best bang for their buck.

When you get into an individual transaction, which that's where like you said earlier, Adrian, mileage will vary for everybody. You get into individual transaction for a specific person. You know let's say it's a client of Lance's and they're super dialed in and all of these points and then the actual property that they turn out loving is a total left field renovation, or, man, the price point is very different from the brand on or I mean, there's so many different things that can happen or that equity line didn't work out. So, what was their backup to that, getting the best bang for their buck is having contingency plans, Plan A, Plan B, plan C, if this then this and that's the piece where if you're going to get a bang for your buck, you need to have resources to tackle when that opportunity comes up. Lance, you said hey, we don't get very many contingent sales right now in the seller's market. Well, you're right, it’s a much smaller percentage, but we have gotten them and when it comes up, when somebody decides, oh, hey, I actually want to stretch because I found that perfect house but it's actually on a little bit of acreage versus not this instead of a three to five year play, this is now a 20 year play, well what's that look like?

So, just being able to hey, there's a property that hasn't been popular because the finishes just suck, like 1983 called and once it's Paisley border around the kitchen, you remember those things are right up at the top of everybody, I had one from the 70s and 80s and it's turning people off but it's a great house. So, that's the key is you have to have a plan, you have to have resources, the more resources you have the better bang for your buck you're gonna get, especially in a competitive market, which we could see a change very soon. I mean, this is spring of 2022, who knows, I mean, none of us have a crystal ball, but interest rates are in the high fours, low fives and six months ago it was very different. So, there's a lot of different things that need to be considered. But I'm never going to be able to totally wrap up with a bow that answer it goes back to mileage may vary, but I'm telling you, you're gonna get a hell of a lot more mileage out of having a plan having your taxes dialed and having your lending dialed in just being smart with your finances, which means you have that team that you're pre-educated. So, that's the long answer to a medium sized question, sorry guys.

Lance Johnson   20:53

We're on a roll...

Adrian   21:04

Lance, would you like to see us off?

Lance Johnson   21:07

So, that wraps up our financial for home purpose episode. Please stay tuned our next episode of the 8 part series in the next episode we'll be learning about home sellers and their selling experience. So, look to our websites for the visual PowerPoint for this and we'll see you next time.

Rob Delavan   21:32

Thanks so much.

Guest Sarah VanHoose 3 of 3

Adrian  00:02

Hello future millionaires and welcome back to the get rich slow podcast. We are your hosts Adrian Shermer, Rob Delavan and Lance Johnson. Good morning.

Rob Delavan  00:12

Good morning.

Lance Johnson  00:13

Good morning, Sarah. Glad to have you here again.

Sarah  00:16

Glad to be back.

Adrian  00:17

It is episode three of three with Sarah VanHoose. You can catch us online Apple podcast, Spotify, audible Amazon music, probably a dozen different platforms when our awesome producer Avery, and Ashley, get us all propagated through the web. We are on YouTube as well. If you'd like to watch a video, we've got some nice visuals that go along with these. As I said, today, our special guest is Sarah VanHoose with journey to influence. Sarah is a financial coach and she is focused on helping individuals couples and small business owners stress less about their money by making a plan and walking through it with encouraging accountability through her online coaching business journey to influence as a trained Ramsey preferred finance master coach, she makes money simple and easy to understand going back to basics. Sarah's background is as a leader in a large healthcare organization. She and her husband James have two daughters and live in Portland, Oregon. As always, you can find out about what we are doing local at ROI-fa.com/events. This is episode three of three, I'm going to be sad to see you go Sarah, but I have a feeling we're going to have you back, we're going to be tracking you. Sarah is probably going to be on our website or the get rich, slow podcast website is a compendium for the people that we love working with, and the resources that we feel will serve our listeners best. Sarah, I think you fit that bill very well. So, today is all about learning about what's ahead for you. We've learned about where you've come from what you're doing now and this is a bit of a peek into the future of what you're doing and what you're really aspiring to accomplish here with journey to influence.

Sarah  02:11

Excited to talk about dreams today.

Rob Delavan  02:17

Okay, so, question one for you, Sarah. What are your three biggest goals right now?

Sarah  02:25

Yeah, right now, influence and impact. So, widening the net of people that I'm able to influence positively around money management, again, dropping the shame, any shame, any fear, any regrets, we just don't have time for that. It's time to move forward. So, helping more people in that capacity is goal number one. You ready for goal number two?

Rob Delavan  02:53

Actually, hold on. So, you said widening the reach. What would that mean for that influence and that impact for folks?

Sarah  03:04

It's making education right and support, easy to access. So, I think we talked about in a previous episode, my friends with budgets membership, again, low cost way to get folks access and continue to widen the social media platforms to be able to put free content out there. Again, for more people to find a friend in finance, in order to help get their questions answered and make the conversation normalized, we need to normalize the money conversation on a regular basis in a wide variety of ways.

Rob Delavan  03:41

Gotcha. As far as reach, this is national and international in this day and age of online content and interactions and so forth. Is that accurate?

Sarah  03:55

Yeah, let's go big, why no, that's universal. I hadn't defined to my location specific yet.

Rob Delavan  04:04

Okay. Good. So, that's an excellent first call, what's your second call?

Sarah  04:11

My second goal is to help support more coaches in their business launches. There are a handful of financial coaches out there just like me, who love coaching, or the art of helping people through challenges and getting them to the other side. But they struggle with the launch of the actual business component side of it. So, I want to show others how I've been able to do it so that they can go have flourishing practices of their own.

Rob Delavan  04:45

Interesting. Okay, that's some serious leverage.

Sarah  04:52

Yeah, it just doubles down on the whole influence. If I can help more coaches, they can help more people were helping  manage their money, a little bit better teaching the teachers, coaching the coaches.

Rob Delavan  05:09

I love that, and the third one?

Sarah  05:12

It really marries with the others is scaling my business, I am still a one woman show over here and doing both of tasks one and test two or goal one of goal two is going to be difficult on my own. So, scaling my business so that I can support others and work on the right work at the right time, in order to continue to have that larger impact while being present with my family, which is also important.

Rob Delavan  05:39

Yeah. I'm looking forward to that fun future conversation. Especially with Lance Jay with us here, he's been instrumental in helping me scale my business. I feel that in the future, one of my goals for this group, and this podcast and so forth is there's going to be some special relationship I think with helping folks with the heart that both you and Lance have to do that and to achieve those dreams and successes and goals and everything else with that. So, I'm looking forward to this.

Adrian  06:21

Yeah, I've watched you guys be the gravity well with the influence to slingshot ethically run businesses a number of times before, so, pick your position very well, Sarah.

Sarah  06:34

Good.

Adrian  06:38

All right. Question two comes from me, Sarah. Where do you see we're going to turn that time machine from episode one in reverse here? Where do you see yourself in the next five years?

Sarah  06:47

I think I alluded to it in my last school, but it’s supporting a coaching operation that is impacting a number of individuals on a larger scale. So, my background, I think we've referenced in the intro a number of times is in health care leadership. So, organization strategy operations, it's part of my love language is the strategy and in fine tuning and process efficiency, I want to be able to apply that to more coaching. think we've acknowledged that there's more people out there that need some side by side support, and some more basic resources in order to leverage their own money management. So, how can we scale that? So, I see myself maybe not coaching as much as I'm doing now, but helping to lead other coaches in that capacity on a larger scale.

Rob Delavan  07:44

Does that change anything for you physically, like your location, where you're at?

Sarah  07:49

I think it continues to give me the flexibility to zoom from anywhere, we can do that now, but doing more of that in the future, yeah, I think that's certainly part of that flexibility component as well.

Rob Delavan  08:05

Workshops, and that thing with other coaches and so forth. There's potentially a physical element to that, then become potentially a national thing or regional, or have you thought that through?

Sarah  08:19

I don't think I've gone that far yet. I think five years from now, we're definitely leveraging regional, maybe some more national conversations, I just feel like with Zoom, I've got clients that are on the East Coast so, it all feels national already because we can connect with anybody anywhere, but it's being able to, again, connect with a wider audience and maybe not even limiting ourselves just to make sure that we've got more support, we need the troops on the ground in order to go help support people. So, developing those coaches.

Rob Delavan  08:52

I love these ideas. This actually goes back to my comments on the previous question, is there's some serious scaling to do and I'm really interested in where you and Lance have a lot of common points here.

Lance Johnson  09:18

Question three, Sara, who should we be looking to connect you with going forward over the next five years?

Sarah  09:26

I think that I'm on the lookout in the next couple of years, is expanding to more business owners and there's two business owners. There's one business owner that again, needs some more operational efficiency, efficiency within their current workforce. It all eludes to finances. It doesn't always like arise as a financial issue, but it's underlying right that there's some financial component to that. So, small business owners that are looking for more support in that direction. But the second small business owner that wants to provide more support for their employees. I think an employee assistance programme should absolutely have financial education or financial coaching as part of that package as employees that are financially settled financially secure, are not stressed out about living paycheck to paycheck show up better. Well, they show up number one, and they're going to show up as better producers in the long in the long term. So, again, expanding the influence, taking my business of one right now and being able to do more group efforts. Again, scaling in the short term with just myself and then moving forward with more coaches. I would love to connect with the get rich, slow podcast audience. You can find me on Instagram at journey to influence and my email address is Sarah@my journey to influence.com.

Adrian  11:18

Very cool, thanks so much for your time, Sarah, very valuable stuff that you're doing and yeah, we really look forward to see what you expand to in the future because your message is clear. It's positive, and it's going to help people, people of all walks of life. So, check her out at my journey to influence.com. I appreciate give us the Instagram as well,  great ways to get a hold of her. For those of us watching, you can see links to our websites. If you want to get in touch with us, the get rich slow podcast also is linked on every single podcast and is a great portal for you to get in touch with everyone that we've interviewed and all the resources that we can possibly make available to you. So, thanks again, Sara. Thanks to our audience. Our disclosures are also available on that site and we'll catch you next time on the get rich low podcast.

Sarah  12:03

Thanks for having me.

Rob Delavan  12:05

Love it. Thank you.

https://tinyurl.com/w7bb73vn

Episode 58