Latest / The Jon Sanchez Show / Don’t buy a rental with your heart…buy it with the math

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Don’t buy a rental with your heart…buy it with the math · The Jon Sanchez Show

• Jon G. Sanchez, CEO: Thursday afternoon to you. Welcome to the Jon Sanchez show on News Talk 780 K which it's a pleasure to be with you and a pleasure to be with my co-hosts. Let's go around the horn and make the introductions. Mr. Dwight Millard on Q Home Loans. How are you my friend? Dwight Millard: I'm fantastic, Jon, how are you? Jon G. Sanchez, CEO: Very good, thank you. Anxious for it be Friday, I'll be honest with you. we were all kinda discussing off air, yeah, exactly, exactly. Aaron of Edgerility, how you doing, buddy? Good, good. ⁓ I ya, ⁓ I ya. ⁓ Dwight Millard: every week. Aaron Clark, Edge Realty: Doing great. Doing great. Yep. I can't wait for the weekend too. Just so don't have to hear anybody complain about the market or rates or bonds anymore because they're just yo-yo and everywhere. Dwight Millard: Yeah Jon G. Sanchez, CEO: Right, right, right. This is true, this is true. I know, that makes for a nice weekend when you don't get those phone calls, that's for sure. Right, Dwight? You know better than anybody. Of course, I don't know if that's really true because you enter your phone 24 seven, so take care of your clients. So yeah, I don't know, that really is the case with you. Dwight Millard: Absolutely. Amen. Amen. try. It's. Jon G. Sanchez, CEO: All right, fellas, well, let's get down to business. Let's tell you what ⁓ we have lined up for. You're to go through today's stock market recap. A little bit of a week session here, but we did get some news after hours not long ago. As always, it seems to happen before the show. Presidents Lebanon and Israel have extended their ceasefire by about three weeks. So we'll see if that has much of an impact tomorrow, of course, in the market. Let me see. Yeah, not even You know, yet. yet on the pre-market because it just started trading the ⁓ hours I should say. So will ⁓ keep an eye on that one for you in the after hours. We'll tell you what we have lined up after the stock market recap. know, buying first rental property is completely, and I mean completely ⁓ different than you buy your primary home, right? Most people don't realize it until it's too late. Well today what going to be doing with the boys is we're going to be breaking down the difference, the key differences of how you qualify with Dwight. What Dwight as a lender is looking for? And in Aaron's world, what makes a property a winner? Because remember, I love this saying, you don't buy a rental with your heart, you buy it with the math. How'd you like that saying that I came up with, Aaron? Yeah, was pretty good, wasn't it? Yeah, it was a good one. Yeah, was a one. a Yeah, was was a was Yeah, Yeah, it one. Yeah, it good one Aaron Clark, Edge Realty: I love it. It's very true. Yeah. Absolutely. It's all about the numbers. Jon G. Sanchez, CEO: you want to see maybe where rates are, et cetera, but this be a great time if we start to see rates coming down and things stabilize bottom line after this, you know, Iran conflict slash war ⁓ gets behind which hopefully will be soon, but who knows. you need to really understand again, this big difference, ⁓ right Aaron? You see a lot in every time, you know, we bring up this subject. I think of ⁓ an analogy Corey said ago where You're not walking into a rental visualizing what the couch is going to look like over in this portion. Or better yet, the smell of freshly baked cookies in the oven. This is all about the math. And three of us can share stories with friends, clients, et cetera, that they don't look at it that way. They'll in and they go, it's like visualize in their mind, this is where I'm going to live. The Christmas tree will be over here. No, wait a minute This is a rental. But yet they still proceed to go forward because they want to be nice people. Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez, CEO: and they do all these unnecessary upgrades and things like that, thinking they're gonna recoup that in higher rents. And as all of us know, that usually is not the case. So it's really hard, especially with the, and that's why I wanted to focus in on the new buyer, really hard, Aaron and Dwight, to convince them you have to look at these properties completely different. And again, Dwight's gonna enlighten us on the lending side, because again, completely different world there. Aaron Clark, Edge Realty: Yeah, I always try to help people understand that you want to look for a property that a tenant can't destroy, where a leak can't happen. You know, it's like, well, I want the tile and I want the pretty fixtures and all that. No, no, you want something bulletproof that when they don't close the curtain all the way, the floor isn't rotted a year later. Yeah, exactly. Jon G. Sanchez, CEO: That's a good, good way to look at it. It's a good way to look at it. ⁓ Right. Right. Stainless steel everywhere. ⁓ Concrete floors. Do I, what about your world? What are you going to tease us on here? Dwight Millard: Mm-hmm. Well, I think it's easier than most people think. I think if you have a vision and you have a plan, you can make this happen, especially if you're at your first one. I that's where everybody had to start. That's where all of us had to start. Everybody's got to start somewhere. So it's good topic for people to pay attention to. Jon G. Sanchez, CEO: we're gonna have to start. Right. How do you, quick question to both of you, I'll start with you, Dwight. How do you someone overcome the fear of buying that first rental? Because it's scary enough when you buy your primary home, but at least you're gonna live there, ⁓ right? relying upon somebody else to make the mortgage payment, et cetera. How do you convince, how do you play that psychological game with people? Dwight Millard: Well, think I try to be reasonable and I share my own testimonies. You can nightmares out but the reality is I think what they think is they think, the hot water heater out at 2 AM. That's what they think. it does happen, it's not ⁓ Yeah, exactly. ⁓ share with my experiences and things like And I think that kind of helps a little bit to understand. ⁓ Jon G. Sanchez, CEO: Right. Right. Right. Not frequent, yeah. Okay, perfect. How about you, Aaron, as the realtor? Aaron Clark, Edge Realty: Yeah, I mean, it's kind of the same thing. It's like take the worst case scenario and then extrapolate it over every experience. And it's like, you know, there's a lot of really good opportunity out there and ways to move where even when you're scared, as long as you see the numbers, you see the potential, you see what the basis outcome is. And the fact is, in most cases, if you buy well, I think we talked about this last week in one of our shows, it's about the purchase, right? It's about ⁓ the price. It's not about the selling price. Jon G. Sanchez, CEO: Yes. Aaron Clark, Edge Realty: If you get into it in such a good way, then even if a year two goes by and you decide, ⁓ it's just not for me, can get out with relatively no consequence and maybe even still put some money in your pocket. So just finding that right one to cut your teeth with is the perspective if it's something that you're having a hard time grasping or understanding what it would be like. Jon G. Sanchez, CEO: Sure, That's a good. And this one thing Aaron's gonna cover for us is again, finding that right one because we buy our primary home, there's a lot of things we look at, right? We again, back to the visualization where the Christmas tree is gonna be in the living room and the family sitting around the fireplace drinking hot chocolate with the snow coming down outside and so on and so forth. Schools, if you have children, that type of thing. But Aaron, when it comes ⁓ to rental property though, it's sure wanna things like schools because, but the bottom line is, you have to really, and this is where your expertise as the realtor comes into play, you've got to look and see what are those amenities that that house is going to offer? Let's say there's no structural issues or whatever. It's, you know, maybe put a little paint, some carpet, and you're ready to go and get it on the rental market. But there's other things that you need to be looking at as the landlord, as the owner of that home, ⁓ again, you don't look at when you're looking at your primary home. Aaron Clark, Edge Realty: Yeah, absolutely. mean, you gotta remember that your tenants are gonna be there for a short time period. So you wanna pick a place where they're gonna be close to freeway, still good schools, things like that. And then from a landlord perspective, you wanna find something that, again, you're gonna have durability where you're not gonna have a lot of issues. So ⁓ a lot my clients, prefer... even though it costs a little bit more, they wanna be in something that has an HOA. So they like condos and townhomes as investments. Yeah, because they don't really have to maintain anything other than the interior issues. They don't have to worry about the roof. They don't have to worry about the paint. They don't have to worry about landscape, things like that. So all of that will be critical to whatever the goal is and how involved you wanna be. Do you wanna hire a property manager? You wanna self-manage? All these things are things to take into consideration. Jon G. Sanchez, CEO: That's interesting. Dwight Millard: you Jon G. Sanchez, CEO: Right. Yep, absolutely. Dwight Millard: Yeah, Jen, think too, I think too is what you probably would never live in as a primary residence can sometimes be the best investment property to Aaron's point, know, access to the freeway, access to the freeways, things, where, you know, you might want to be in as an individual in a cul-de-sac, you know, know, Pleasantville or whatever. But mean, when you got a tenant, typically that, you know, they may even be working. Jon G. Sanchez, CEO: What do mean by that? Okay. Okay. Mm hmm. Right. Dwight Millard: ⁓ Graveyards at the casino. mean, there's just all sorts of things. So I mean, what you may not ⁓ you may not personally take down as a and I think that's we got to go into it You got to you got to go into it that way because may make more sense as an investment property for ⁓ for tenant and and some of could be some of the best Jon G. Sanchez, CEO: Right. Yeah, that's the point. Yes. I got to get this question up before I forget, then I'll get to the stock market side. Aaron, this is a question for you. Do you try to pick a demographic when you're, especially on your first property where you don't want to screw up, do you try to pick a renter demographic? Like, hey, I want to target the millennials or I want to target retirees or that type of thing. Aaron Clark, Edge Realty: too much. It's more about where you're going to get most profit, you know, so maybe to some extent when you're looking at somebody who's trying to avoid having any sort of vacancy ⁓ they're to focus on being by the university because you're going to get an influx of families and college students and know everything in between. But overall, it's really about what the price is, what the numbers are. That's it. Jon G. Sanchez, CEO: Right. Mm-hmm. Great, okay, okay. Yeah, I've never thought about that. Yeah, targeting the demographic side of it. So that's interesting. All right, boys, let's get down. I got a couple minutes before we have to go to breaks. So let me get the stock market out of the way here because it was not a very exciting session whatsoever. And fortunately, it was a down session. Yesterday, of course, was a great day. Another record setting day for the NASDAQ and the S &P. But man, today we just could not get any momentum whatsoever. We didn't really have any negative news, but. I'm telling you guys, I'm going to go back to what I'd said a few weeks ago before we ran up and we did hit a bottom. So I was correct in my assumption. I'm starting to feel it again. But the bones are starting to ache a little bit as the saying goes. We're to weaken on some internals of this market, especially you look at the software like ServiceNow and a few others that this week have reported earnings numbers that were way off of Street's expectation. ⁓ You got to this sector because it's very important to the overall health of the market. So you add that to the uncertainty. ships seized by Iran yesterday, the mess that's still going on there today. Trump is in the polls. America is very upset at him. They're tired of the high energy prices. So his ratings are down. So that has people concerned that we Republicans may not well in the midterm elections. ⁓ So we've got a of factors now that are starting to come around. ⁓ because of the extent of this war that is going on. so I'm starting to see and visualize some of the internals, et cetera, that ⁓ really be on the cusp of a pullback. I don't like when we just continue to set record after record after record like we've done so here in the last two to three weeks. It me very nervous. I've said that many times. I would rather ⁓ have a market that's kind flat or even one that goes down and then up for a bit. But where you just go up day after day after day, ⁓ That's a market that is very primed for any type of negative news for the profit taking to come in. So just be cautious at this point. I'm going to go back to from my bullish comments and feeling to I want you to be cautious with your money at this point and just watch things very closely because, as we all know, we're one true social post away from this market rallying or one true social post away from this market falling and bringing things down. ⁓ I also don't like what I've been seeing these last couple days where oil has been edging up a little bit. Even though the market's not paying much of attention to it, it is something that eventually will catch up to the market. There's no doubt in my mind about that. we finished with a loss of 180 on the Dow, 0.36%, closed at 49,310. Now as that gave up 219 points, 0.89%, S &P down 30 or We'll come back, ⁓ touch the oil prices, gold, and of course my favorite, is Dwight's analysis of what's going on in the bond and the mortgage market. be right back. Let's turn it over to ⁓ Kristen Snow right now traffic center. Hello, Kristen Welcome back to the Jon Sanchez Show on Newstalk 780K, which we're there in Clark, Ovej, Realty and Dwight Mollard of OnCue Home Loans. All right, once again, we finished down to 180 on the Dow. The NASDAQ gave up 219 S &P lower by 30. We're gonna get to our topic here in a moment. Don't buy a rental with your heart, buy it with the math. Oh, it's gonna be a good one. First, let's hit the commodities and the mortgage side of things. Oil for the day up $2.75, 95.76 a barrel. Gold lost $30.80, closing at 4,727 an ounce. Three basis point increase, Mr. Millard, on the 10-year, 432 is our close. Take us into the world of mortgages, my friend. Dwight Millard: Yeah, Jon, I think we dodged a little bullet today this market, even though the, according to Mortgage News Daily, we were flat at 6.32 on the year. The mortgage-backed started out positive, I think they finished up or down worse. ⁓ I think it was down 13. We were up nine, so it's a, what is that, 24 point, 22 swing? You know, Jon, I mean, we got repriced. Everybody got repriced, Jon G. Sanchez, CEO: I Mm-hmm. Mm-hmm. Dwight Millard: But I think if we for now could just stay in this 6-3 window, maybe 6-2-5, you it's not where we want it to be, but ⁓ it's Your ⁓ governments your 15 years are still inside a 6 in the 5.9 range. ⁓ Jon G. Sanchez, CEO: Right, right. Are you getting many people right now, Dwight, Bimini and ask this, that are coming to you saying, should I do a rate buy down just to get in that sub 6 % range? Dwight Millard: So Jon, that's an interesting question because the challenge that you have is if you pay money to do a permanent rate buy down, if you as the consumer, not a builder or a seller, but if you're the consumer's paying it, it's quite a bit of money to buy down. mean, let's just say rates today are hovering around 6 and 1 half. You want to get a 599, that's probably going to cost you a couple points. And then all of a sudden you close and eight months later, Jon G. Sanchez, CEO: Mm-hmm. Dwight Millard: you know, rates go to five and a quarter, you just wasted that money. And remember, every point, you know, if you break it out, takes about four years to break even. You know, I'm just using it. Yeah, I'm just using it. You know, I yeah, I mean, so you're just to even break even, to even start to feel the benefit. Yes, you've got a lower payment, but you paid for that lower payment upfront. I'm not, I'm, yeah, yeah. Jon G. Sanchez, CEO: Bridge Trap, yeah. Is that what it is? Okay, so eight years for two points, interesting. Right. Right. Yeah, I know. That's why I brought it up. Completely psychological. Aaron Clark, Edge Realty: Yeah, it's definitely psychological for sure. Dwight Millard: I am not a huge fan of paying multiple points. mean, again, if you've got a seller or a builder willing to pay and it helps attack your closing costs and your rate buydown, fantastic. But again, I'm gonna go back to, think the temporary buydowns, Jon, are at least worth looking at because you never lose the money. So, example, a two-one buydown, let's say... Jon G. Sanchez, CEO: I know you're not. So explain that real quick. Dwight Millard: You know, what we put in impound is 15 grand, let's just say. That's what the 2-1 buy down costs. That's the savings. Let's just say you're in it a year. So you use 7,500 of them. I'm just going to keep it simple. And you decide to refinance or sell. The remaining amount goes towards your principal reduction. So you never lose the money in a temporary buy down scenario, unless you take it all the way, obviously, to the term. Jon G. Sanchez, CEO: Okay. Okay. and explain to the audience what the two and what the one mean. Dwight Millard: Yeah, so you're basically buying down the first year at 2 % lower than your fully indexed rate would be, 1 % lower, and then you're at whatever that rate is. And typically, Jon G. Sanchez, CEO: So we're at 6 and 1 half, then you're looking at a 5 and 1 half. Dwight Millard: Yeah. Well, you're looking at a four and a half the first year. That'd be the second year. That's the second year. The first year, you're 2 % lower. So you're four and a half. Yeah. Yeah. Yeah. Yeah. Now, unfortunately, Jon, in the old days, we used to be able to qualify you at the start rate. Now we can't. So the buy down used to have a huge benefit when you could actually qualify at that lower. We used to do those just to qualify. Yeah. Jon G. Sanchez, CEO: What would you say about the 1 %? I thought it was like the second year. OK, OK. So that's one way to write, Aaron, to get the psychological side. Yeah, yeah. Okay. Aaron Clark, Edge Realty: Yeah, where someone wouldn't normally qualify. Jon G. Sanchez, CEO: Right, right, yep, I remember that. Dwight Millard: So now they got smart and there's no at the start rate. Jon G. Sanchez, CEO: So what's the negative of the 2-1? Dwight Millard: If the rates really don't, if they don't move by the time you get to that point in the third year, probably gonna have a slightly elevated rate than what you could have gotten out of the gate, you know, if they didn't move. ⁓ would probably be the, you one of the negatives. right now, and I've been a big two one, I've never been a short term temporary buy down guy, but ⁓ right now it sense that, you know, if you think that there's a, you know, better day in terms of rates, Jon G. Sanchez, CEO: Okay, yeah. Dwight Millard: get that first year, second year at a discount. Jon G. Sanchez, CEO: So let's just run real quickly some math before we go to break. So let's say the 30-year national average is 6 and 1 half. You do a 2-1 buy down. Now you're at 4 and 1 half. Next year, you're going to be at 5 and 1 half. And how do you determine the cost of that 2-1? Dwight Millard: Right. Four and a half. Correct. So a buy down, so let's just take six and a half, it's gonna cost two and a quarter points approximately for that buy down. So now Jon, you as the consumer would never pay the buy down because all you're doing is prepaying your savings. you only would use it if you have a seller contribution, seller builder contribution, because otherwise if you pay it, you're not, if you're paying for it, right? Jon G. Sanchez, CEO: Okay, so you get an add in a quarter. Okay. So never call your mortgage professional and say, want a two one, only if Aaron negotiates that. Okay, that's a great point you bring up. Dwight Millard: Yeah, yeah, yeah, it should be just in your incentives or whatever you're trying to get your concessions. That's where you would utilize it. Absolutely. Jon G. Sanchez, CEO: Because there's no good use of that money doing that if you were coming out of your own pocket. Right, right, right. ⁓ often do you negotiate that? A two one. Does that happen very often? Dwight Millard: Yeah, because all you're doing is prepaying your savings. That's all you did. Yeah. Aaron Clark, Edge Realty: I mean, we do it on just about every transaction right now. It's just not necessarily directly for that. It might be closing costs. So now the buyer saves $10,000 out of their pocket towards closing costs that would normally come out of their pocket and they can redirect that towards putting a new carpet or something like that. So ⁓ it does get utilized, but it just depends on where you're gonna get most ⁓ for the buck and where it's gonna emotionally help the buyer. Jon G. Sanchez, CEO: Okay. Mm-hmm. right. Aaron Clark, Edge Realty: forward. Because it's not always about the dollars and cents. It's sometimes, you people say all the time, I know it doesn't make sense, but I want my payment at this number and I'll pay whatever it costs to get my payment at this number because it's psychological for me. You know, I know it doesn't make sense to pay extra to my two and a half percent rate on my house, but I to pay it off in 15 years instead of 30. I mean, it ⁓ just depends what, yeah, every situation is different. Jon G. Sanchez, CEO: Yes, yes, of course. Right. Yes, yes. Dwight Millard: Mm-hmm. Jon G. Sanchez, CEO: Mm-hmm. Mm-hmm. So every situation's different. All right. All right. Great advice, boys. All right, we come back. We're going get into our topic. Don't buy a rental with your heart. Buy it with the math, right? So different buying that first rental versus buying that first home. We're going to break down the differences that Aaron's going to show us, Dwight's going to show us from a lending perspective. You don't want to miss us. Let's turn it over to Jack Savin first. He's got news, and weather. Hello, Jack. Aaron Clark, Edge Realty: ⁓ Jon G. Sanchez, CEO: Welcome back to the Jon Sanchez show on New Stock. Yes, it does. Sorry folks. caught that. Aaron was saying, you getting your cattle back again and the beef business? I'm like, not this year because there's no water and fuel prices are through the roof and so are cattle prices. so yeah, talking about how much I it. And I had a beautiful 65 head herd and yeah, there's some direct, this time of year and well, starts in about February, the calving and Dwight Millard: Hahaha Aaron Clark, Edge Realty: You No water Jon G. Sanchez, CEO: But yeah, you know you're right, Aaron, in all seriousness, yeah, that's why beef prices are just through the roof. And ⁓ the quality, it's just terrible. It's just, no matter what it seems like where you go, the quality is just not there. Everyone's cutting corners and not finishing them correctly and so on and so forth. So a challenging time. That's why you're seeing a lot of people eating chicken, which my wife says has gone up dramatically. So she's gone out and bought a bunch of chickens. So are easier to take care of. So you gotta out some way to get your protein, fish or chicken, right? ⁓ Aaron Clark, Edge Realty: Mm-hmm. show you. You Yep. Jon G. Sanchez, CEO: Of course she fed me these lamb chops for dinner the other night that I, they were like a T-bone steak. I've never seen lab chops. I think she got them at Costco. were amazing, but goodness, they were thick. I've never seen something like that. And she said they're like $20 cheaper than the equivalent amount of but still beef though. ⁓ Welcome my life, that's for sure. All right, again, let's get down to our topic today. Don't buy a rental with your heart, buy it with a math. Dwight Millard: Yeah. Jon G. Sanchez, CEO: So this is gonna be really interesting for those of you that are looking to get into the real estate game, right? I always like to of prime the pump for many of you that are sitting on the sidelines. So we're gonna start with, actually, Dwight, excuse me, we're gonna start with you. The qualifying for the rental is not the same as qualifying for the primary home. Break us down on that. Dwight Millard: Yeah. Yeah, well and what's good Jon is in the old days you used to have to have at least 25 % down, you know, then we went to 20. The good news today is you can get into an investment property especially even your first one with 15 % down and so I mean qualifying basically is the same as if you were gonna qualify for your primary. The only factor is that we get to use per the appraiser whatever they put on the rent schedule we get to use 75 % of that. that rental income to offset your payment, which is a huge benefit to most people that are just right on the edge. So I like to say it on to a lot of people, it's kind of funny that is if you're a decent price on you're getting a decent rate, there's a high probability that, know, for qualifying that you're just gonna offset the rent again with the cost. So qualifying is as if you were qualifying for your own credit scores, you know, it's. Jon G. Sanchez, CEO: Yes. Dwight Millard: the same as anything else the mortgage world. The higher the credit, the better interest you're gonna get. Debt to income, we're gonna follow the automated underwriting systems. I mean, if you get an approval, we gotta keep it under 50 backend ratio. And if you get an remember, if you're buying an property, you have to conventional. You cannot go government unless you plan on living in it. ⁓ Jon G. Sanchez, CEO: 3 Dwight Millard: So, and then typically you can count the rents. Now, if there is a current lease outstanding on the property, you can actually use that as well. If it benefits you, you could use that at the 25 % vacancy. And Jon, people go 25 % vacancy in Reno is absolutely absurd. And it is. I mean, you got a two or three, I don't know, Aaron. Yeah, well, but that factors in repairs, that factors in somebody leaving. Jon G. Sanchez, CEO: Mmm. Yes. Yeah. They still have a worst case scenario though. Dwight Millard: You know, I mean, it just there's so much to that rental that renter variable. Then that's the reason why. And I've actually argued before and one I haven't lately won, but able to say, hey, here's the rental vacancy factor in northern Nevada. ⁓ do we hit? And there's just other things that go into that now. So. Yeah, yeah, yeah. Jon G. Sanchez, CEO: Can I break this down just a little bit? want to go back to the beginning. OK, so the down payment. So I'm sitting here doing the math, and you said 15%, somewhere around there. Here we are. Let's just use a medium price, $600,000. Aaron? So let's say 10 % would be $60,000. So you're still looking at $790,000. Where the hell do people get that kind of money for a rental? I mean, how do you overcome that? Dwight Millard: Mm-hmm. Mm-hmm. 90,000. Well, I mean, there's different, yeah, yeah, yeah, from you, from you, yeah, yeah. Jon, gifts, there's all, just the way you buy your house. mean, you know, an inheritance, maybe something just different happened. I mean, typically it's not through a savings, but I've seen, talked about it, people leverage other real estate, and you've talked about this, ⁓ to buy. Aaron Clark, Edge Realty: their investments Jon ⁓ Jon G. Sanchez, CEO: Yeah, right. Cash out the brokerage account. Smart ⁓ Yes. Dwight Millard: investment property. they do have it and so it... ⁓ Jon G. Sanchez, CEO: Yeah, but what about the person starting out? Aaron, come in the conversation. How do you guys find someone that can come up with that kind of money for a rental? I can understand that, I get back to psychological. If I'm gonna move into this house, I'm gonna raise my family there, I'm gonna do anything I can to get into that house. But a rental where I'm gonna be lucky maybe to break even, like you guys always ⁓ about, ⁓ to come up with that kind of cash, Aaron, let's start with you as the realtor. Where's that money coming from that you're seeing with people? Okay. ⁓ Aaron Clark, Edge Realty: Crypto, ⁓ gold, yeah. you know, I'm getting more and more clients that are getting a little more savvy that, you know, maybe they're single, they've started a career job, they're making pretty good money. And honestly, they're living at home and their first property purchase instead of a primary residence is they are buying an investment property or they're buying, like, I mean, we about this a few weeks back ⁓ ago where Jon G. Sanchez, CEO: Mm-hmm. Aaron Clark, Edge Realty: They're buying a four unit or a duplex and they're gonna live in one. So it reduces that down payment to where they can do owner occupancy at 5 % or whatever. So you have a little bit of that. There's also special loan programs. Dwight's probably talked about this a couple weeks ago. I think it was the DSCR loans where they're based basically on how much income and rent is coming in. You still have to do a larger down payment. And if you already have an investment that maybe you got one when rates were at 2.5 % or 3 % and that thing's got a, you know. Jon G. Sanchez, CEO: Mm-hmm. Aaron Clark, Edge Realty: 25, 30 % equity in it now, you can leverage that equity as your down payment or even your primary residence. You can leverage that equity. But again, it's in the buy. So you gotta find something that might be sort of off the books that someone else might look at and go, ⁓ that's super expensive when it's on the books, but when it's off the books, you can save some cash. So finding those spots are really key. Right now. Jon G. Sanchez, CEO: Yeah, the apocalypse seems to things. Dwight, know people's finances better than anybody. You're at the credit apps and the bank and the brokerage statements, et cetera. Where are you seeing these buyers coming in from getting the cash from? Dwight Millard: Yeah. a lot of it Aaron's absolutely correct, but Jon you you also indicated I mean as as slips away in the in the arena of your residence So does it the activity is is further but there the errands absolutely right I've seen people buy a prime an investment property before they buy primary Property because they're there. They're either at home. They're renting. They've got three hundred dollar rent at a friend's room Jon G. Sanchez, CEO: Right. Right. Dwight Millard: kind of amazing and people I know you probably don't see that well you get the investment part of it, but They saving a little bit more. That's really that there are it's it's a kind of amazing because I know they're my kids You know they came and ⁓ came and it in his pocket ⁓ You know, some of these kids are actually disciplined and they're actually saving some money. So I mean it yeah Jon G. Sanchez, CEO: Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Now you're Aaron Clark, Edge Realty: and also other locations. Reno ⁓ high more and more people are going out of state, out of city, out of area. So let's not forget that. You can buy a rental anywhere in the US. ⁓ Jon G. Sanchez, CEO: Yeah, yeah, good point. That's a good point, Aaron. Dwight Millard: Yeah. Yeah. Jon G. Sanchez, CEO: a great point. Dwight Millard: Yep. Jon G. Sanchez, CEO: Yep, yep, excellent point. OK, and then the final point, Dwight, and then we'll move on. brushed over the credit score side of things. So where do you want to see? Let's go minimum for those out there listening. Dwight Millard: would just say if you really want to keep this balanced 720, I think you get under that, it's going to start putting strain on interest rate and your payment. So yeah, more difficult to pencil it. ⁓ Jon G. Sanchez, CEO: Okay, okay. which will make it even more difficult to pencil the deal. Okay, all right, very good. our takeaway here is not a bad idea instead of buying your first primary home if you're young, buy that rental property. Second one, make sure, I this could be easier also, Dwight, especially if can find, if Erin can find you a house that already has a renter in there. How often, I don't hear much about that though. How practical or logical is that, Erin? I mean, how often do you find? a landlord selling a home to another potential landlord where you got that built in tenant. Aaron Clark, Edge Realty: Well, usually what'll happen if it's gonna be occupied, they realize they're ready to sell sometime that year, so they're not renewing leases and they put them at month to month. So they'll be occupied and then the person buying it then can say, let's say it's a duplex, we'll use that as an example again, and they're gonna live in one of the sides, they can determine, okay, well one side's getting $100 less a month than the other side, so as soon as I close, I'll kick that person out, give them a 30 day notice and then I'll move into that spot because, Jon G. Sanchez, CEO: Yeah. Okay. Aaron Clark, Edge Realty: under the guidelines, they have to move in within, what is it Dwight, 60 days or something like that? Yeah, for it to be still an owner occupancy loan. So they can do that. I mean, most people aren't selling an investment property with nine months left on a lease because then the buyer has to honor the tenant's rights until the completion of the lease. Dwight Millard: 60 days, 60 days. Jon G. Sanchez, CEO: Hmm, okay. Interesting. Okay. Yes. Right, right, okay, perfect. Dwight Millard: Well, Jon, it's hard to show a house too with a tenant. Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez, CEO: Yeah, good point. yeah, beautiful. All we're gonna come back to Aaron. He's gonna educate us and inform us on the next one. What makes a good rental versus a good home? Let's wrap up with Kristen Snow. Right now, at Center, Kristen. Welcome back to the Jon Sanchez Show on New Stock 780Q. It's Mr. Dwight Millard of OnCue Home Loans. Can we get your phone number, Dwight Millard: Yes, sir. 775-240-2022. Jon G. Sanchez, CEO: Aaron Clark of Adrylity, your phone number, Aaron Clark, Edge Realty: Same area code, 673-6700. Jon G. Sanchez, CEO: Beautiful. Thank you, fellas. Aaron, back to you. What makes a good rental versus a good home? Aaron Clark, Edge Realty: very interesting question. Back to what you said earlier about buying out of heart and numbers, it's kind of similar. when are looking at primary homes, they're looking at, you know, how ⁓ updated kitchen, the bathroom, the houses, all that kind of stuff. But as an investor, going back I said earlier, you want to look for that durability. You want to look for that location. You know, is it in an area where you're going to get high rent demand? Is it in an area that's popular? versus an area that's not popular so that you don't have that vacancy. It's really good if you can to get a rental in an area that's mostly not rentals because that area is always gonna be a high demand rental property. And will also too depending on whether not you're doing long-term rental versus short-term. So like an STR, which is a short-term rental like a VRBO or an Airbnb or something like that. Or if you do like a one of those housing type things for traveling nurses, things like that. You look at rentability. One bedrooms, they rent, but don't get as much bang for the buck as you do with a three or a four or five bedroom, obviously. And then when you getting something and it does need updating or improving or something like that, that you're not going in there and spending money on things that are gonna easily get ruined or you're gonna have to replace. ⁓ Jon G. Sanchez, CEO: Mm-hmm. Mm-hmm. White carpet. Aaron Clark, Edge Realty: You know, yeah, I mean, you're not gonna put a $3,500 or $6,000 refrigerator in there. You might wanna go down to the local refurbished used refrigerator places and buy one for 500 bucks, because you're gonna replace it. Because the bottom line is, a tenant is, most tenants, not all tenants, are not gonna treat the property as well as you are, ever. Because that's not in their mindset. Their mindset is I'm a user, I'm here in this property, I'm gonna use it until I don't. Dwight Millard: Yeah, yeah. Jon G. Sanchez, CEO: Mm-hmm. Mm-hmm. discerning is the renter right now in today's market? Aaron Clark, Edge Realty: What do you mean discerning for the renter? Jon G. Sanchez, CEO: So using your refrigerator example, right? they gonna walk in and go, ⁓ that's not a double door stainless steel refrigerator. But you get my point. far as you as the landlord, want, like you said, a bulletproof home, not the fancy, but things that are gonna last. Are renters right now going, no, I don't want, you Aaron Clark, Edge Realty: Yeah. No. Yeah. Jon G. Sanchez, CEO: Kind of that industrial type of home. I want again, smell the cookies in the in the oven, that type of thing. they're going, I gotta take what I get my hands on because there's not anything out there. That's the point I'm trying to get to. Aaron Clark, Edge Realty: I mean, the demographic in the area will definitely change that answer, but I will tell you that you have the renter that's gonna want all the high end, whatever stuff, you're gonna lose that renter quickly because that renter is somebody who's willing to spend the money, which means they're also willing to buy soon or they're that time period. If you're looking for longevity, like the best tenants, Jon G. Sanchez, CEO: Right. Okay. Aaron Clark, Edge Realty: are frankly the ones that are gonna stay there for five, 10, 15 years. They're always gonna pay you rent. They're not gonna bug you unless there's a problem. so for something like that, they're not gonna really be too picky about anything. They're just looking at their bottom dollar as far as how much is the rent and how great of a communicator are you. And again, this is if you're self-managing and has the thus far in the front end been convenient? Jon G. Sanchez, CEO: ⁓ yeah, you bet. Mm-hmm. Aaron Clark, Edge Realty: where you easy to get a hold of when there was a problem. When the refrigerator, water heater, you know, it's like I had a tenant that called me, I was on vacation out of the country and they said the water heater broke and flooded the garage, you know, like I'm so sorry, I'll get this handled for you, I'll get it all taken, we did it as fast as humanly possible and they're a long-term tenant and they're happy to, they wanna make sure you get paid on time too, you know, so those are the types of things that you wanna look for. Jon G. Sanchez, CEO: Mm-hmm. Mmm. Nice. Are you, real quickly, are you a big fan, and Dwight, you've a landlord, so I'll throw this in real quick, big fan allowing tenants to do improvements? Because there are some, especially those long-term tenants, ⁓ let me do the yard, ⁓ let me fix this or do that. Or is that a no-no? Aaron Clark, Edge Realty: Yeah, I mean, it's a case by case. mean, you gotta fill out their ability sometimes if it's something that's non-consequential, like they wanna do the yard. It's like, all right, I'll let them do the yard and then I'll drive by and see what it looks like. And if they look like they just love it and they're into it and they're good at it, then why not? Give them a break on the rent and let them do it. Yeah. Jon G. Sanchez, CEO: Yeah. Dwight 10 seconds answer. Dwight Millard: Yeah, I agree, Jon. Just get an approval first from the landlord, know, Aaron, me, you, you know, just get an approval first. Jon G. Sanchez, CEO: Yeah. Okay. Perfect. boys. Excellent job is always very fascinating topic. We will do more of that for you so you can get into that rental game when you want to. God everybody. Have a great week or great day. I will be back with you tomorrow. See, I was thinking this weekend already. Boys, you screwed me up. I'll see guys next week. ⁓ Take Aaron Clark, Edge Realty: Yeah.