Podcast

Ep 116 – Interview With First-Time Home Buyers Whose Rent Went Up 90% In One Year BAILED On Renting!

HBH S1 EP 116 | First Time Home Buyer
HBH S1 EP 116 | First Time Home Buyer

 

Jacob is a first-time home buyer who closed his property around mid-May. Discovering the How to Buy a Home podcast became a game changer for him. Tune in to learn how this first-time home buyer learned about the perils of online lenders, and the importance of finding the right team to get the job done and dump those stupid rents!

Interview With First-Time Home Buyers Whose Rent Went Up 90% In One Year BAILED On Renting!

Another First-Time Home Buyer Used The Podcast To Dump Their Rent

Jacob and his partner had been renting in the expensive DC area for nine months. When they moved in, they had just gotten there after rents had already increased 60% in their building. They were already paying that premium. After living there for 9 months, they discovered their rents were going to be going up again in 3 months another 30%. That means that they were looking to avoid that 90% increase over the last 12 months. Thankfully, they had started to plan to buy a home. Let’s hear their story.

This is one of your favorite episodes because we get to hear from a real-life person, not just me rambling at you. I’m excited. We’ve got Jacob who’s in from Denver. Everybody wants to know your story. You’re a first-time home buyer. When did you close on your property?

We closed back in mid-May 2022 and moved in early June 2022. I have some projects to do but nothing major. I’m starting to feel like this is home.

Everybody has a reason or an impetus. Was there something that got you started and thought about it? When was it? How long did it take you to get here?

My wife and I lived and met in DC. We lived there for about six years. When the pandemic hit, we started thinking like a lot of people about what our future looked like and if DC was the place for us. Denver’s an expensive market but DC is way more expensive than Denver. Part of the reason we decided to make the move out West was that we could afford to buy something, at least in the short-term, as opposed to waiting a bit of a long time to be able to purchase something in DC. That was part of the impetus to move out to Denver. Once we got out here and got the lay of the land a little bit, we rented for about nine months while we checked out neighborhoods and things like that and then got a little bit more serious about it at that point.

I started doing some research online. I found your podcast. I’ve also listened to a lot of Dave Ramsey in my time. I reached out to his endorsed local provider system and to you to try and get hooked up with a realtor. I use those two sources to meet a couple of different realtors and interview those realtors. I ended up going with the unicorn that you recommended, which was super helpful. She was amazing. We couldn’t have done it without both of you. I appreciate it.

I always tell people that I love to hear unicorn success stories. That’s great. I also want to make sure to let everybody know you can interview and talk to as many people as you like to. You guys moved out. It was about a nine-month process. You moved with the idea in mind. Besides interviewing the realtors, whether it was through Dave or unicorn, when did you start your financial plan? Was it while you were still in DC or when you guys made the move?

We started back a few years ago, saving up for a down payment while we were living in DC. Thankfully, we were able to put a little less down in Denver than we would’ve had to in DC. That sped up the process a bit. Making the move to Denver is still not a cheap area but a cheaper area than where we were. That helped.

A lot of people always ask me about employment. How did you do? Did you keep the same jobs when you moved to Denver or did you get new jobs but you were still okay to apply for your loan?

We got new jobs but they were both still in the same industry essentially. We both work in marketing. We got new jobs in marketing. At least from what we were told, it seemed helpful to not mess up with our loan approval at all by switching to a different field, essentially.

As I say on the show a lot and I’m not a fan of it because everyone’s situation is going to be different but the rule of thumb is that’s the phrase they use if it’s in the same industry. What it’s trying to do is if you’ve been working in a corporate job for fifteen years and then you start your business making jelly, that’s where they’re looking at. If you pretty much stay in the same genre even, a lot of times, they’re going to be able to count the two years. You don’t have to start all over again. Did you guys look at different down payment options or were you just trying to get in as quick as you can and go with the lowest payment you could?

Once we got set up with our unicorn realtor, she helped us get set up with a mortgage broker as well. That was helpful because she helped us shop around loans and we didn’t have to do that work ourselves. I’m sure we probably could have saved some money and done that but to be honest, it was nice to have that piece of the process not on our plate since there is a lot in the process that we’re not experts at. You need people that you trust that can be those experts for you. We ended up putting down 20%, which was good. We could have gone lower but we ended up going with 20% to have a lower monthly payment and avoid that PMI.

How are you feeling? Were you ready for a change in your monthly payment? Is it more than your rent? Is it similar to your rent? Were you prepping for this back in DC?

HBH S1 EP 116 | First Time Home Buyer
First Time Home Buyer: It’s nice to have that piece of the process not on our plate since there is a lot in the process that we’re not experts at. You need people that you trust that can be those experts for you.

 

We knew we wanted to stick within 25% or so of our monthly earnings to keep our mortgage payment down under that. Thankfully, we were able to essentially stay flat from what we were paying for our rent to our mortgage. It’s even a little less expensive than what we were paying for rent. When we moved out of our apartment, they increased that rent by 30%. Three months from then, we would have been paying more than we are for our mortgage.

Your rent immediately spiked after you moved out.

They were going to increase it by 30%. We were only living in that place for 9 months and they increased it by 0% from the people before us too. Rents are skyrocketing in Denver. I know a lot of major metros in general. This was a good way for us to try and avoid inflation as much as we could and lock in that monthly payment.

That’s insane. It’s funny. I’m seeing all these different people online. I get it. There’s a generation that feels like they’re being crushed like, “Boomer, it’s easy to save 20% down in 1977 when the house costs $16.” I’m like, “If you do the math on the inflation, the price of the house is still the same based on wages being increased.” That’s a whole other story. The key is this inflation, being able to have one payment that you know isn’t going to change like gas and groceries and everything else. We’re doing this in July 2022 and the numbers came out that we hit 9%. You did go with a 30-year fixed, yes?

We did. Thankfully we locked it in. Our interest rate wasn’t in the 3 or 2s. It could have been a few years ago. It’s gone up another 1% probably since we locked it in. Years from now, maybe they’ll come back down and we can refinance and get a lower rate. Who knows?

That’s what I keep telling everyone. If prices continue to go up, you can always refinance your loan. Waiting for a low rate isn’t the best move for people. We got out of the finances, got all the timing and understand all that. Tell us about the process. What were the things that surprised you? What were the things that maybe you were excited that you were ready for and tackled well? What happened?

One of the surprising things when I first started following this show was learning about the appraisal gap and having to have that extra money in case the appraisal didn’t come in where you wanted it to. That freaked us out a little bit, to be honest. That’s because the market was pretty crazy when we were buying. Maybe it’s settling a little bit in certain areas. People don’t have to worry about that as much. We ended up getting lucky. The company waived our appraisal. It ended up not even being an issue at all, which was nice.

With the process overall, we wanted to take our time and make sure, especially we were finding the right realtor because we know that we’re not experts in real estate and we need to have someone that is and we can trust. We took our time with those interviews and talked to realtors multiple times to make sure that this was a person that we were going to feel comfortable with a lot of the life savings that we had put down for the last few years and saving.

Were there any specifics that put everyone over the top for you or was it the comfort level?

The comfort level was big. There was one person that we talked to that you could tell was at the bottom of the rung of the people in her office that was taking on first-time home buyers. You had warned us of that in some of your episodes. That was helpful. The realtor we ended up going with had 30 years of experience and knew the market well. She ended up knowing the realtor on the seller’s side, which helped us get the deal done. We only had to put in 1 offer on 1 house, which a lot of people have been saying 5, 10 offers.

You prepared us for a lot of the levers that we might have to pull to make our offer stand out. Knowing those things like having to give potentially a bonus to make sure that the seller would act quickly and take our offer. We ended up going that route. Putting down some non-refundable earnest money and things like that helped our offer stand out and make it a one-and-done situation as opposed to having to play it out for months on end putting in offer after offer.

I can get into the minutia all day long. When you’re doing it with the buyers and when I’m hearing from the buyers, there are games that you play. If a house was on the home on the market on Monday, we would put time restraints and try to get people to give us an answer by Friday before the open house on the weekend. It has to be attractive enough for them to want to do it but there are all those little pieces and games that you have to play when you’re in the bidding war.

Finding the right realtor is important, especially if you’re not an expert in real estate. You need to have someone that you can trust. Click To Tweet

That’s amazing. No one likes to hear it but hopefully, it’s changing. My average was 5 or 6 offers. I wrote the book on this before we got the acceptance because the whole amount of competition was overwhelming. How much time did you spend looking at houses on your own so that when you walked into this place, you knew that was it? Did you do a lot of internet research and stuff before?

Yeah. Probably maybe too much, to be honest. We were looking at the Zillows and Redfins for 1 year or 2 before we got serious about the process. I’d recommend not doing that because prices moved so much in that year or two that we had the type of home in our mind that we thought we were going to be able to afford. We were way priced out of those types of homes. Thankfully, we had been keeping up with things like your show and other reports online about where prices were going. We were able to come back and mentally prepare for not being able to have that super huge single-family home in the Denver Metro area that would be a multimillion-dollar home. Looking online is great but also, I would maybe caution you to not get your hopes up by doing that too early in the game.

I like that a lot. I can frame that in a way. I want people to understand that the emotional stuff is good to keep you excited and motivated. Stop looking at list prices and look at sold prices in the last month or 2, not 8 months ago. That’s what will confuse you. The other thing is understanding the appraisal gap. I like people to be prepared but you can be over-prepared if you’re thinking about the emotional stuff, what you want. That could over-prepare you for a little bit of a letdown.

Being prepared for our appraisal gaps and extra things that you’re going to have to pay and all that stuff, you can go as deep as you want into all the things that could go wrong because then you’re happy when they don’t. You had a great team working with you but were there any surprises? We can’t tell you everything. I’ve tried 115 episodes. Was there anything that shocked you?

I would say showing up to open houses on the weekends and seeing 60 people in a house was surprising. Even knowing how insane the market was at the time, I didn’t imagine that you would see it in person like that. You hear about it from podcasts and things like that that you might listen to and from your realtor about how crazy it is but seeing it in person helped us wrap our minds around how competitive the market was.

Hearing about some of the things other people were doing to get their offers accepted like waiving inspections. We did not want to do that and we did not do that. It’s wild what people were doing when the market was so white hot. Outside of that, there honestly weren’t too many other surprises. That’s a testament to the group of people that were helping us and were in our corner along the way.

That’s incredible to hear. I want people to get started and understand that a good group of people is going to be able to help you early. You might still need another year to save but that good group is going to help you get started and then you can supplement it with the podcast, reading articles and all the other things. Getting into it and having that team behind you is nice to fall back on. I do not by any means think that being a realtor is as important as being a doctor, a lawyer or something like that but I do sometimes make the analogy because it makes sense. Trying to figure everything out on your own is like trying to represent yourself in court.

Don’t do it. Hire a good lawyer. That’s what your unicorn team is. All the pieces, from figuring out where your lender and figuring out your unicorn and then down the line, your insurance, your tax people and all that stuff’s going to be important for you. We’ve hit on everything through the questions. I’m going to put you on the spot here. If there’s anyone out there reading going, “I can’t believe it. This guy pulled off a place in Denver in nine months and avoided the rent trap,” what are your biggest tips to people out there or thinking about buying a home?

It’s the preparation. Even if you’re not ready tomorrow or months from now, having people that you talk to in your corner to develop a plan for when you will be ready was important. To be honest, we didn’t put that team together until we were ready but we had done enough research at least to know, “This is how much cash we want to have to put down. This is how much we need to save every month.”

Doing monthly budgeting, which a lot of younger people don’t do. They don’t pay attention to where their money’s going. Have your savings rate ready to where you can. Have the money to make it happen, especially in a market where interest rates are higher and monthly payments are a bit higher than they were years ago. It’s important to make sure you understand where your money is going every month so that you know whether or not it’s a reality for you.

With all this inflation talk, I’ve been listening to a lot of general financial talk stuff for my readers but also for me to make sure that I can ride the wave and know what I’m doing. Warren Buffett has such an old man philosophy. It’s that wise person in the corner. Budgeting is important. You’re right. Gen Zs out there want to reach through their headphones and punch me in the face. Warren Buffett says, “You don’t save your money after you spend. You spend your money after you save.”

You can’t figure out how to pay yourself first and how much you should be putting away every month to save until you know all the line items of what you’re spending. That’s what we call the B word, Budget. The tips are budget, prepare, interview and find yourself a rad rockstar team. The biggest tip is to avoid that 60% and 30% increase in rent. Six weeks in, how’s the house? Are you unboxed?

HBH S1 EP 116 | First Time Home Buyer
First Time Home Buyer: Looking online is great, but don’t get your hopes up by doing that too early in the game.

 

Yeah, we’re unboxed. We’re still hanging stuff on walls, doing some painting and some things like that, little projects here and there. We got lucky that we didn’t get a total fixer-upper. It was pretty much move-in ready. That was helpful for us too, not having to worry about projects when we are still adjusting to a new area and figuring out what we’re doing on the weekends like hiking and snowboarding and not having to take all of that time working and being stuck in our house that we’re working on. That part’s been nice.

It is great for everybody to think about out there. My dad’s the luckiest guy in the world and got transferred out here to Orange County where you can surf or snowboard. One is 10 minutes away and one is 1 hour away. There are places like Denver out there with killer hiking, killer social life and some of the best snow in the country. Wherever you are, keep your mind open. For some people going to Denver, it’s going to be a bit up. For you guys and a lot of urban metro people out there, there are some hot cities out there, Denver, Austin, Portland, Seattle, places that are not quite San Francisco, New York and LA expensive just yet.

Maybe more years or so. We’ll see.

It truly depends on how many hipsters, craft beer and funky doughnut shops open up. That raises the prices of everything. Jacob, you’re the best. I appreciate it. Thank you so much. Thanks for sharing everything with everybody out there.

Thanks for having me on. It’s been a pleasure. I appreciate all of your help.

I got to tell you, after years of doing this thing, I love doing this. The mission is to help educate and empower you guys, the people that need it the most. This is incredibly rewarding for me. Stories like Jacob should encourage you. They get me pumped up but they’re for you. When you hear a story like that, you realize there is light at the end of that dark, gloomy and disgusting rent tunnel. If you read closely, you’ll know that together, they worked hard in their preparation and found that gold at the end of the rainbow. It’s like all things that people call lucky.

Luck is when opportunity meets preparation. First, they knew their numbers. They wanted a monthly payment of about 25% of their take-home pay. That’s way below what lots of Americans and Canadians are paying for their rent. It’s good for them for picking such an ambitious goal. The good news was that even with a rent that had gone up 60% and was set to go up another 30%, their monthly mortgage payment is less than their rent. Can I get an amen?

How on earth do you pull that off? You prepare. They prepared and did the research. They’ve reached out to Dave Ramsey’s ELP team to talk to realtors. They checked out other avenues to talk to other different realtors out there. They even checked out my crazy little show. They knew that this selection figuring out who their team was going to be was as important, if not more important than understanding all the other steps in the process. They made that one a priority rather than trying to learn everything from A to Z.

They figured out that getting the right guide to help guide them from A to Z would be the most important decision of the entire first-time home buying process. They interviewed a few, taking their time. Knowing this was the way to avoid a rocky road, they were super careful about this process. With the info they got from my show, they spotted when they were pawned off to a newbie, one of those rookie agents. They decided to maybe back off from that one to take their time and keep interviewing and planning until they got a real unicorn verification, someone that had their best interests at heart plus a lot of experience.

Once they got that by working with the unicorn realtor, they got recommendations from a great local unicorn mortgage broker. I was glad to hear that, though I was not shocked. They soon discovered it was far better to use the power of a trusted local mortgage broker to shop their rates and loan programs for them instead of attempting to do it all on their own by calling different banks and lenders and searching different banks and lenders online.

Gang, this is my number one tip that I give to all Gen Z buyers. This is a big one. You might want to save this and share it with your friends. I know and understand that you are used to shopping to get the best deal online but I need to explain this to you. You have been duped and sold by the mortgage industry. They’re spending billions on Search Engine Optimization, SEO searches, advertising and marketing to get to you. I’ve been doing this for many years. I tell my closest friends and family, “Do not use a lender online. Don’t even bother shopping for rates online. You’re doing it wrong.” That’s not how I would do it. That’s not how I let my closest friends and my family do it. This is my gig and jam. This is what I do.

I’m not blaming anyone. I understand. I appreciate the idea of being able to go out there and get something better and get the best deal. I fear that a lot of time, the younger buyers are looking at this backwards. You think you’re beating the system by looking online for the best rate, like buying a big screen TV on Amazon but you’re being suckered into the system that they’ve created when you start looking at online lenders.

Buyers think the big lenders are like the new online travel sites. They ended up getting travel agents out of business. They decided to stick it to the overpriced travel agencies and give the people real options by doing all the shopping for them online, scoping out all the deals and sending you directly to the source for your best discount. No. When it comes to online lending, it’s the exact opposite.

The big online lenders are the big greedy corporations that most of the younger buyers don’t necessarily like to support. They treat you like a number and give you lousy service with about ten different people handling you from the first bait and switching phone calls until the end of the deal. I have found and so do a lot of my unicorn realtors that they lose more deals than any other lenders that we work with because they spend their whole time, effort and energy working on their brand and advertising so they can capture you so they can get you to call them.

Make sure you understand where your money is going every month to know whether or not something is a reality for you. Click To Tweet

They bait you into a deal that lots of times go sideways. It might end up being more expensive and get you hidden fees and up-charges or not close at all. Knowing most of you, once you get to the end, if you’ve got to pay extra fees, you’re going to stick it out because you’re already in the deal and you want to close on the home and you don’t want to back out. Let’s go back to the travel agency analogy because the people giving you the real mom-and-pop service are local brokers. The only difference is you don’t have to pay those mom-and-pop prices.

They can still get you the volume pricing. They shop for you. They find you the best rates and products from multiple different lenders and then they do the work. They want you to be satisfied because they grow by word of mouth, not by spending billions of dollars on their online advertising and online search systems to capture you. A unicorn team rocks. That’s my tangent. Let’s go back to Jacob and his partner. Once they had their number set, their unicorn experience realtor put in an offer for them. The cool thing was because they had a unicorn realtor, their realtor knew the seller’s realtor. The combination of the experienced realtor and the things that they learned from the podcast was a great thing for them.

The combination of that knowledge of a realtor to a realtor, plus the experience of the realtor knowing how to put the offer together, plus everything they learned from the podcast before they even wrote the offer, made their offer stand out and made it a one-and-done situation. Only one offer in, pretty amazing in this market. Jacob gave you some great tips for all you first-time buyers out there. He said don’t spend too much prep time on Zillow and Redfin before you get your team in place. If you’re going to be doing that all day, it’s just daydreaming.

A dream changes to a goal once you attach a plan to it. The team accelerated the process to getting a practical plan that worked for them in their specific situation. It was great to do some online searching on their own but it can be dangerous and possibly get your hopes up. Jacob’s biggest tip was preparation. He said, “Preparation is having people to talk to in your corner 6 months to 1 year ahead of time.” He brought up the B word. That might’ve freaked some of you out. Budgeting for a home can be as exciting as budgeting for a vacation.

That’s the way you got to think about it. In these potentially scary economic times coming, the economy getting a little freaky, if you’re a pessimist or a skeptic, then you should be doing this anyway. If it all goes to hell, then you have a rainy day fund ready for when things go bad. Think about it. If the financial apocalypse happens and you start saving now, then you’ve got options to survive the mayhem. If everything falls apart and your future looks shaky, maybe your company struggles and your job is going to be in jeopardy. Budgeting means that you have a nest egg set aside so you can have some safety money if you need to job hunt or cover for a little while when you don’t have a paycheck coming in.

It gives you a nest egg so if you decide that you want to bail and get out of town on a vacation and forget your troubles, you’ve got that. If you are lucky enough to remain stable while the economy gets a little rocky, then you’ve got a savings account set up. You can take advantage of things as rich people do.

If that shaky economy gets the housing market to start flattening or correcting because maybe the buyer pool is shrinking as others struggle, less competition means easier buying and better pricing for you. There is no downside to starting the B word and starting budgeting now. Don’t say I didn’t tell you about it. Using that budget will help you prepare. In the worst case, you’ve got some coverage for the economic downturn.

Who knows? If it does create an FML situation for you, at least you’ve got something backing up. That’s the worst case. What about a medium case? Let’s say you have the savings and you do lose everything. What the hell? You can go on a luxury world vacation tour and pray that everything gets better when you get back. In the best case, let’s say the economy craps but you got lucky. You get to keep your job. You’ve got a down payment saved up so you don’t have to deal with that 30%, 60% to 90% increase in your rent since your landlord maybe is going to be hurting during a recession and they need some money so they’re going to keep jacking up the rents.

Prepare. When you’re ready, remember that the unicorn nation is real. Jacob is a real bright guy. He deployed me a research to find the right guide for them. They interviewed a ton of different realtors, including the people from Dave Ramsey’s handpicked crew. In the end, the underground revolution of the unicorn nation was their best play. They succeeded in a big way.

This isn’t easy but it’s not rocket science either if you have the inside track. I’m not building a real estate empire with my unicorn to sit on some big pile of money and treat everybody like a number. We’re trying to make sure everyone does it right. This is simple. You have choices. You simply need to understand the game. Learn the insider secrets that will benefit you and prepare you for the game.

What you do is you hire a unicorn coach and then you wait to pop the bubbly in the locker room when you win the game that was rigged against you. You’re like every underdog in every cheesy sports movie. You control the narrative with your preparation and decision to have a unicorn on your side. You can and will be able to beat a rigged economy, game and real estate system. You deserve a fair shot at a comfortable life. You can do this.

 


 

This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!

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