YFP Media

YFP 337: Key Real Estate Trends for Homebuyers in 2024 with Tony Umholtz

Posted on by YFP Media

Join Tony Umholtz from First Horizon Bank as he forecasts 2024 housing market trends and offers expert insights. Sponsored by First Horizon Bank.

Episode Summary

With inflationary pressures historically high and inventory tight, many people are feeling understandably nervous about the housing market as 2023 comes to a close. But what can homeowners and homebuyers expect in 2024? To help us answer this question, we are joined once again by Tony Umholtz, a mortgage loan officer with First Horizon Bank. In this episode, we tap into Tony’s 20-plus years of experience in the industry to get his input on current trends in the housing market, what makes this cycle different from 2008-2009, the correlation between presidential election years and interest rates, and what prospective homebuyers should be doing right now to get ready to buy a home in the new year, plus so much more! For a comprehensive overview of the key market trends that pharmacists and healthcare professionals need to consider when buying a home, be sure to tune in today. Episode sponsored by First Horizon Bank.

About Today’s Guest

Tony Umholtz graduated Cum Laude from the University of South Florida with a B.S. in Finance from the Muma College of Business. He then went on to complete his MBA. While at USF, Tony was part of the inaugural football team in 1997. He earned both Academic and AP All-American Honors during his collegiate career. After college, Tony had the opportunity to sign contracts with several NFL teams including the Tennessee Titans, New York Giants, and the New England Patriots. Being active in the community is also important to Tony. He has served or serves as a board member for several charitable and non-profit organizations including board member for the Salvation Army, FCA Tampa Bay, and the USF National Alumni Association. Having orchestrated over $1.1 billion in lending volume during his career, Tony has consistently been ranked as one of the top mortgage loan officers in the industry by the Scotsman’s Guide, Mortgage Executive magazine, and Mortgage Originator magazine.

Key Points From the Episode

Key market trends for pharmacists and healthcare professionals looking to buy a home.
How this cycle differs from the global economic crisis of 2008.
A reminder to maintain perspective when it comes to affordability in today’s market.
Why you shouldn’t necessarily wait for interest rates to fall before you buy.
Some of the ways that the presidential election might affect mortgage rates.
Tony’s take on the consolidation of lenders and what trends to expect going forward.
Getting on strong financial footing and other tips for preparing to buy a home in 2024.
What you need to know about the National Association of Realtors (NAR) commissions ruling.
Recommendations for getting your pre-approval process started.
Insight into the First Horizon Pharmacist Home Loan.

Episode Highlights

“Every market is different, every challenge is different.” — Tony Umholtz [0:07:43]

“Don’t just buy to buy – Buy if you find a home that suits your family and your needs.” — Tony Umholtz [0:13:57]

“Making sure that, overall, you’re on strong footing financially – is the right thing to do.” — Tony Umholtz [0:23:42]

“Your timeline depends on when you’re looking. If it’s in the summer, May, or June, then maybe you wait until after the new year to get an actual pre-approval. But it’s never too early in my opinion.” — Tony Umholtz [0:29:02]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00] TU: Hey, everybody. Tim Ulbrich here, and thank you for listening to the YFP Podcast, where each week we strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I welcome back onto the show, Tony Umholtz, a mortgage loan officer with First Horizon Bank. During the show, I tap into Tony’s 20-plus years of experience in the industry to get his input on current trends in the housing market, what makes this cycle different than 2008/2009, his take on the connection between presidential election years and interest rates, and what prospective homebuyers can be doing right now to get ready for buying a home in 2024.

Okay. Let’s hear from today’s sponsor, First Horizon, and then we’ll jump into my interview with Tony Umholtz.

[SPONSOR MESSAGE]

[0:00:41] TU: Does saving 20% for a down payment on a home feel like an uphill battle? It’s no secret that pharmacists have a lot of competing financial priorities, including high student loan debt, meaning that saving 20% for a down payment on a home may take years. We’ve been on a hunt for a solution for pharmacists that are ready to purchase a home loan with a lower down payment and are happy to have found that option with First Horizon.

First Horizon offers a professional home loan option aka doctor or pharmacist home loan that requires a 3% down payment for a single-family home, or townhome for first-time home buyers, has no PMI and offers a 30-year fixed rate mortgage on home loans up to $726,200. The pharmacist home loan is available in all states, except Alaska and Hawaii, and can be used to purchase condos as well. However, rates may be higher and a condo review has to be completed.

To check out the requirements for First Horizon’s pharmacist home loan and to start the pre-approval process, visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com/home-loan.

[EPISODE]

[0:01:52] TU: Tony, welcome back to the show.

[0:01:55] ToU: Hey, thanks for having me, Tim. Good to be here.

[0:01:58] TU: Excited for this conversation. We’re going to pick your brain, tap into your expertise, Tony, on what you’re seeing in terms of current market trends. We’ll talk about what may be ahead in 2024, especially for those that are making the decision or want to make the decision to buy a home early in 2024. And then we’ll wrap up by talking about the pharmacist home loan option as one option that pharmacists may consider as they’re looking at some lending solutions for buying a home.

Let’s talk about current market trends. I think every time we’ve talked on the show in the last year or two, we’ve said something along the lines of, hey, this is a crazy market. This is a weird market. Here we are, end of ’23, it seems like interest rates are starting to stabilize a little bit. But we’re heading into a new year, obviously, market volatility. We’re going into a presidential election year.

What are you seeing right now, Tony, as your boots on the ground working with many other pharmacists and healthcare professionals that are looking to buy a home?

[0:02:53] ToU: It truly is a unique year in a lot of ways. I know we’ve said that before. The one thing about the mortgage industry and the real estate industry is ever-changing. It’s constantly changing, and you’ve got to constantly adapt in our industry. It’s constantly evolving. Some things that are just truly unique right now is obviously interest rates, how quickly they’ve risen. I think it’s the fastest they’ve risen since the 70s. They definitely are meeting some resistance now. It’s not to say they can’t keep climbing higher, but we’ve seen a little bit of a pullback here recently, primarily based on the consumer price index numbers, which have been slowly coming down.

We’re getting to that threshold where lenders, like in the lending world, when we look to sell a loan to Fannie Freddie, or to some dealer, or investor, they don’t see rates going any higher. So they’re not paying a premium for higher coupons, which are rates. You can kind of see that we’re kind of getting towards the top here, but it’s just a truly unique time.

I think there’s other headwinds here. I don’t want to dive too deep yet, but we’ve got to be careful because we may not be out of the woods. I mean, the fiscal stability of the US is another thing we really have to watch, because bonds could be priced, government debt and rates could really be priced based on the solvency of the US government and the debt ceiling. Getting through these debt ceilings and the debt ballooning like it is could be a pressure on rates in the future.

[0:04:22] TU: Yes. One of the things I love, Tony, about your perspective when you come on the show is, just giving us some of the macroeconomic considerations of what’s happening. There’s what we know now, and then there’s what may or may not happen in the future.

One of the things I wanted to ask you about is, knowing the experience you have 20 plus years in the industry, knowing you’ve lived through some of the cycles that we’ve seen,’08, ’09 is the one that kind of jumps out to me that that was a very challenging season for many. Obviously, we saw the impact on real estate, we saw the impact in terms of foreclosures that happened in that period. What makes this cycle different than what you saw back in ’08, ’09?

[0:05:02] ToU: In ’08, ’09, it was such a challenging time, and I got into the business right after the 9/11 pullbacks, was a little bit of a recession there too. But the ’08, ’09 was just devastating, especially in the southeast, in Florida where I’m located. We saw some property values get cut in half. But the dynamics were completely different than they are today. We had an oversupply, overbuilding of homes. We had mass speculation. In the run-up to that, you had clients that could get as many mortgages as they wanted based upon a credit score. There was no fundamentals, there wasn’t a debt-to-income ratio.

There was mass speculation, people building homes based on credit, may not have had even down payments. So it was just it was completely a bubble driven by both speculation and easy money, right? When ’08 and ’09 came, and the crash came, we still were very busy. There was a lot of inventory. Now, granted, a lot of the transactions were short sales. Lots of people wanted to refinance because rates started falling into recession. But the challenge was that a lot of folks would have to come to the table with money to refinance because the loan-to-values didn’t change. The market corrected like that. The government came in and put different policies in place. But it was amazing how the market corrected. Investors would not buy certain things. It happened very, very quickly.

Then, of course, the regulations stepped up. The regulations that were put in place post ’08 and ’09 have really helped make – now, it made lending very tough, and buying a home very difficult, but it’s loosened some since then, but not a lot. So you still have to show a very tight debt-to-income ratio, credit scores are important. All these things are important in buying a home. So it’s made the credit side of the housing market much more healthy.

Now, we basically had from 2010, to 2020, and even 2021, we were underbuilt as a nation, like our population was growing. But we weren’t building enough homes to keep up with that. I mean, so many builders went out of business in that timeframe. I knew really good builders who pretty much – who had been in business for decades before that pretty much shut down for a number of years before they reemerged. We were underbuilt all those years.

Now, we’re in a situation where we don’t have enough inventory, right? We have more demand for housing. This crisis is different in a lot of ways. It’s more of an interest rate-driven crisis, right? It’s driven by interest rates being high and not enough inventory. Those are the two issues we run into today. Every market is different, every challenge is different. That past cycle, in ’08 and ’09, was just a rational exuberance in lending, and then in construction, it was crazy. Everyone was just building to build, there were investors lined up.

I remember clients coming to me, Tim, saying, “I just got my name picked in the lottery,” and basically, all they were going to do is flip that house. They were going to put their number in, and they were going to flip the house when it was done. I can’t count how many of them did that. There was so many of them who did that. A lot of them got burned at the end. They got in there, the home finally was built. Then the property values fell. Now, they did come back over time. Now, we’re in a situation where we just don’t have enough inventory, and that’s the biggest challenge now, and the affordability with rates being high, and the combination –

[0:08:39] TU: I was just thinking about affordability, Tony, as you were talking. Thinking about many of our listeners, especially those that are on the front end of the career, maybe first-time homebuyers, it’s a totally different world out there than when I graduated in 2008. I think about today’s graduates. We now have student loans that are turned back on after a three-plus-year freeze on interest rates and payments. If they have other fixed expenses, like car notes and payments, obviously, interest rates have gone up. Now, we look at what’s happening in mortgage rates. Not just on the interest rate, but also in terms of the home prices and appreciation.

What you could buy if you think about in terms of a monthly payment, which is what a lot of people are looking at in the context of the budget, what you could buy three, four, or five years ago, very different, in terms of what you can buy today, and especially when you factor in not only is the monthly payment only going to go so far but obviously, home prices have gone up in that period as well.

What I’m hearing a lot of anecdotally, Tony is, people that are looking at their interest rate and saying, “Whether it was those that were first-time homebuyers or last decade that maybe they thought this was their starter home, and now they’re looking at, and saying, “I ain’t moving. I’m not trading my 3% rate for an 8% rate.” So they’re kind of staying in the home longer, maybe they’re spending more of their money on remodeling the home, and doing other projects, or spending it elsewhere, instead of moving.

Then, those that maybe are in that phase where they’re nearing retirement, maybe thinking about downsizing, going from a two-story to a one-story home, and they’re looking at the same thing. If we don’t have to, can we wait so that we don’t trade our 3% rate for an 8% rate? I think that’s obviously furthering the issues around supply.

[0:10:21] ToU: Absolutely. Absolutely. There’s no doubt about it. There’s a lot of pent-up demand. I mean, we all feel it. Families are growing. There’s more additions to the family. Even extended family moving in. All these things are happening now, Tim, and it’s pent up. In talking to a couple veteran real estate agents that I know, that had been in the industry 20 plus years, their thoughts to me were – you can get a better deal on a house right now. Yes, it’s expensive, but you’re going to get a much better deal on a home right now in the current climate. And most people see rates coming down in the future when refinancing and affordability comes back.

Definitely a very, very challenging time, obviously. I mean, the one thing that I would say, I don’t want to discredit the student loans and everything that’s going on. But just looking back at the ’08, ’09, 2010 crisis, the job market was not nearly as healthy as it is now. We all have to remember that. We look back at history, and we think we may have it so tough. But I always look back, and my gosh, my dad had it way tougher than me. When my grandfather was alive, and I’d speak to him about what he went through, his perspective hit home, working three jobs. All the things he did, it was just a different time. Yes, things were cheaper, but wages weren’t where they were, and opportunities weren’t where they were.

We look back and I look at ’08, ’09, and the job market was not near as healthy as it is today. So there’s much more opportunity for people right now. It’s an overabundance of opportunity to be employed, but the costs are higher. Part of that’s inflationary, part of that was – we don’t want to get into all the details, but there certainly is an issue with the cost. I do think you’ll see slowly the rates come back to normal. Rates should not be this high. They should be – it should be 5% to 6% on a 30-year. that’s probably where they should be. That changes a lot of numbers in the sevens. I mean, it changes things quickly.

[0:12:29] TU: Let’s talk about that for a moment, Tony, because you said something earlier about pent-up demand. And when you’re talking about 5%, 6% rates, if, which is a big if, but if we see that transition happening, that pent-up demand, there’s going to be an explosion of buyers into the market, which further challenges the supply and demand issue. I think, as we were talking offline before we hit record, I think the tendency, especially of a first-time homebuyer in this type of market is to say, wait, and I want to wait for prices to come down. I want to wait for interest rates to come down.

Obviously, someone’s got to be ready to buy. We don’t want someone to go down that pathway before they’re financially ready. However, does that potential waiting mean there’s more people that are flooding into the space? So maybe rates do come down, but now, you’ve got more competition in the market, and you pay more for the home. I think there’s an interesting balance here, and I just want to get your thoughts on, might there be a place to buy now, and even if rates come down, then there’s an opportunity maybe to refinance in the future?

[0:13:29] ToU: Well, I think that’s exactly what I’m hearing from some of the real estate agents that I know, is that, as soon as – I mean, they all have a lot of buyers that are on the sidelines that they represent. They sense it. As soon as rates come down to a little bit more meaningful level, they’re all going to want to come back in. What does that do? This creates a lot of competition. In the areas where you’ve seen a little bit of a buildup in listings, it’s a good opportunity to get a much better deal on the home.

I will say this though, you don’t just buy to buy. You buy if you find a home that suits your family and your needs. I always say if you’re going to be in a city for five years, it makes sense to buy. It always makes sense to buy versus rent. But if you’re only going to be there for a transitory period, then it probably doesn’t make sense. You want to just continue to rent, but rental costs are likely not falling much if at all, probably will go the other way. The cost of renting versus owning over time will be more.

I would just say, just from what’s been shared with me is, it’s going to get a lot more competition quickly if you wait. I do think we’ll see rates fall. I don’t know how quickly or when, but you can just see it. You can kind of already see it in the market. I don’t want to call it, Tom, but I told a couple of my friends that are CFAs, which are certified financial analysts. I said, “Watch, the 5% on the 10-year treasury will be likely be a peak. So far I’m right. I don’t know [inaudible 0:14:55]. They go, “No, it’s not, Tony. It may not be. This and that.” One of them said, “You might be right, because they’ve rallied down. [Inaudible 0:15:03] now.”

I think, the economy can only take so much, and I think, that’s the issue. I think we’re getting to that point. If you can afford it now, you’ll get a better deal if it’s the right home. I think you’re going to be able to lower the cost of ownership later, I really do.

[0:15:23] TU: One thing I want I want to get your perspective on is, I’m already seeing rumblings out there on social media and the news about the connection between a presidential election year and what historically has happened in the economy here. We’re talking more specifically around mortgage interest rates. Again, disclaimer, we’re not trying to predict what may or may not happen, but I do think it’s just an important piece of information as we head into 2024, which is a presidential election year. Give us your insights, Tony, of what you’ve seen in previous election cycles.

[0:15:52] ToU: You can’t go in saying it’s going to happen, that rates are going to happen. There’s a couple things that I’ve seen, and nothing’s a guarantee, but it’s typically a rocky year for the stock market in an election cycle. Stocks are usually volatile, typically, on the downside.

[0:16:09] TU: In case, we haven’t had enough of that, lately, right?

[0:16:12] ToU: Yes, right. We haven’t had enough of that. But crazy enough, the S&P is up this year, primarily because of big tech names. If you equal-weighted the S&P, it’s not doing well. But on a relative basis, it’s up because of those big tech names. But, typically, the stock market does not do well in an election year. What does that mean? That means, bonds usually rally, because money flows. Although we’ve seen bonds and stocks more correlated than ever this year. But typically, that’s what it represents.

The other piece is just the uncertainty, people rally to bonds. There are some people that say, I don’t necessarily believe this, but they say, “Hey, there’s political pressure by the incumbent party to keep getting rates to come down.” I don’t necessarily believe that, but some do. Typically, you will find that rates will normalize or get a little better in an election year, on average. If you go back through history, it typically does. I don’t think we’re going to see a huge rally, but we could. I mean, it’s interesting, UBS, some of the big brokerage firms are actually calling for – I think UBS calls for 275 basis points and Fed cuts by next fall. That’s huge. I would never predict that.

I think Morgan, Stanley, and Goldman are calling for maybe not that high, but close. So my personal feelings are, the Fed is going to wait till the job’s done. I just think they’re going to do it. They’re going to stick by their mandate and make sure inflation gets down, and it’s going in the right direction. The last report was 3.2%. I think that continues. Then, the other thing is economic decline. We’ve just got to watch the job market, the health of the economy. Walmart had some comments this morning in their earnings, and the stock was really getting hit. It’s around consumer spending. If we start seeing these things decline, that’s going to be a deflationary signal, and that will cause rates to decline.

[0:18:08] TU: Yes. The last thing I wanted to get your insights on as we’re talking about current market trends here, and something you brought up in our discussion as we’re preparing for this episode is, what you’re seeing out there in terms of consolidation of lenders. Which makes sense. It’s been a challenging market. It’s been a challenging period. Is this a space where kind of the top are getting stronger, and the weaker are falling out? But I think that’s important to discuss, as people are making the decision of who they’re working with as a lender. Just to understand what the landscape is and what’s going on right now.

Give us a quick recap of what you’re seeing of consolidation of lenders, and what trends we may expect going into the new year.

[0:18:47] ToU: Yes, sure. I mean, just to be very transparent on the mortgage industry, it’s a very, very low-margin business. At the end of the day, it’s a huge transaction for individuals. But with all the costs involved in origination, and the way the secondary markets, and the hedging work, it’s a super low margin business. It really is one that has to be done on volume and units. A lot of lenders are really struggling right now.

Most lenders that have what’s called a servicing book, that means they’re servicing loans, that can show some profitability. I will say, even some really big lenders are in jeopardy right now, like really big names, possibly even publicly traded. It’s not an easy industry with these margins. A lot of consolidation is going on in the independent mortgage bank. I don’t want to get too technical for the audience, but I just think it’s always good to be as transparent as possible. So independent mortgage banks are non-bank originators. There’s been a lot of consolidation in those groups. They’re acquiring the ones, and sometimes it’s fire sale because they’re losing so much money, that they’re just being gobbled up for their assets, and their technology, and their people, basically. More or less their people. You’re seeing a lot of that right now.

I think it’s going to get worse over the next 60 days, though. It’s going to get real magnified here. I’m hearing about it. There’s some wholesale lenders that are closing up access, but that’s more for the broker community. So if you’re a mortgage broker, and you’ve got a couple lenders you broker to, you’re seeing more wholesalers go wholesale side, lenders that are pulling out of the business. I noticed that a big one was pulling out, they won’t take applications after December 6th. Some of that stuff’s happening, and it can affect people. I mean, I’ve had people tell me in past cycles that, “The funding stopped. My loan was approved, and now they don’t have a loan.” I wouldn’t frighten a lot of folks. I think most lenders are going to be okay, but there are going to be some that don’t make it.

It’s just hard to predict, because the originators themselves don’t know really what’s going on. Like I said, it’s such a low-margin business that the folks operating it, running it don’t always share with their salesforce what’s happening. But I think you will see continued consolidation, and probably some big names that maybe merged to hide the failure. That’s usually what happens. Oh, these two are merging. Well, there’s a reason why they’re merging. It’s going to be – unfortunately, it’s been a tough time.

[0:21:18] TU: With that uplifting message about the current market trends and where we’re at, let’s shift gears and talk about how someone can get themselves ready to buy a home in 2024. Obviously, thinking about the spring season. If we do see those rate reductions, we’re talking about, obviously, the pent-up demand coming into play. I think it’s something I know, Tony, we’ve talked about this on the show, but just from my own personal experience. We often think this is a longer-term decision, and then it just starts going really quickly. I mean, just human behavior is – especially for first-time homebuyer, wanting to get a home, and I’m going to have all my ducks in a row, and we’re going to do this in March or April 2024.

Then all of a sudden, you get on to Zillow, you get into Redfin, you drive by some properties. Next day, you’re talking to a lender, you’re working with a realtor, and all of a sudden, you’ve got an offer. That’s it. These things can move quicker. I think anything that folks can be doing to prepare, and put themselves in a good position to come with a competitive offer, to have a strong lending application. This is the time as we wrap up 2023 to be thinking about that.

From your perspective as a mortgage loan officer, what are some of those key things that individuals should be listening for, especially the first-time homebuyer who maybe hasn’t gone through this process to make sure that they’ve got a good financial house in order as they look at seriously purchasing a home?

[0:22:40] ToU: Sure. I mean, I think the first thing, just make sure you have margin in your life. What I mean by that is, how much are you paying in debts? What’s your income coming in every month? Create that margin, your budget. What do I want to spend on housing, and this property. I think creating that is important. Obviously, paying debts down, keeping your liabilities to a minimum is important. The other thing is just looking at your credit score, making sure your credit score is where you need to be. I think, for a lot of folks, especially first-time homebuyers, it’s the revolving credit. It’s the credit cards, and that balance on their credit card compared to their utilization.

If they have a $10,000 cap on their spending, $10,000 limit, and they run it up to $9,000, that’s going to hurt their credit score. Keeping that down, that ratio down at 50% or below, I find is the best. So if you can keep it down there, that’s going to help your credit score. Just making sure overall, you’re on strong footing financially, I think is the right thing to do. Having some savings for a downpayment if you choose to. We’re obviously going to provide the best we would in any lender, most lenders should, would provide clarity as to the best options for you as an individual, whether it’s a low downpayment option, or one with more down payments. You’ve got to think through that. Do I want to have 20% to put down or 3%? Am I eligible for 3%?

Savings is important, start creating that savings, that savings piece. You have to have enough foreclosing costs as well. There could be, depending on the timing of this and what state you’re in, and I don’t want to touch on this too much now, because it’s very much preliminary. But there was a big ruling on real estate commissions through the NAR.

[0:24:31] TU: I just saw that.

[0:24:32] ToU: It could change – I don’t want to get to, because it could be some back and forth with this.

[0:24:38] TU: Supreme Court decision, right, that happens?

[0:24:40] ToU: Yes, that’s right. But I think two states have already accepted it. I think Missouri and New York I think are implementing it. We’ve just got to watch how buyer commissions are impacted. I think, overall, it’s going to bring – I mean, my opinion, if this goes through, I think it’s going to bring the costs of commissions down tremendously for the end user. Selling a home will be cheaper than it’s been in the past. But my concern is, under representation of buyers, because they’re going to be going straight to the listing agent. They’re not going to understand the schools, the area, and they’re not going to have the representation. That’s my concern.

I also think it’s going to cut maybe 30% of the realtors out of the business immediately. So it’s going to be huge changes in that portion. I think ultimately, it’ll save people money, but it could underrepresent and provide less service to people. So that could create an additional expense for some buyers in some areas. They may have to pay their agent something. That’s typically coming out of the sales price now.

[0:25:49] TU: Tony, for those that have not been following the details of this decision, we’re talking about more in the podcast in the future. But I think what you’re saying is a really important point about potentially the underrepresentation of buyers as this shakes out. Just explain more about why that may happen.

[0:26:04] ToU: Well, if the real estate industry adapts where you have to basically pay a buyer’s agent to represent you directly, it might be tough for a lot of people to do that. Even though you’re ultimately going to save the money on the home purchase because the seller doesn’t have to pay 6%, they’re paying 3%, you’re basically paying whatever portion, difference. I don’t know what it’s going to be in that area. But let’s say it’s 3%. So if you’re paying 3%, seems like a lot. A $200,000 our home, it’s $6,000. So if you’re coming out of pocket with that, that’s additional expense. Sure there’s maybe a way we can roll it into the price somehow. Seller concessions, things like that, but there’s additional costs.

I think a lot of people will say, “I don’t need that. I’m going to go right to – I found this home on Redfin, or I found it on Zillow, I found it online. I’m going to go right to this house.”

[0:26:54] TU: The seller, yes.

[0:26:56] ToU: Well, the seller’s agent, listing agent represents the seller. So they may not give you all the details on the area, the property. Is it the right school system for your kids? Is it the right area? I mean, I just think there’s going to be an underrepresentation for some buyers in certain areas if they don’t engage that buyer’s agent. Just over the years, that’s what I’ve seen the value, is those agents do provide clarity and help on what’s the best area. I mean, if there is value there, and I think, some people may give that up. That’s the concern I have when initially reading through the ruling.

[0:27:31] TU: Great insights. Again, that’s evolving as a story, and new news to me. I hadn’t heard about the couple of states that already adopted it. We’ll keep an eye on this to make sure we’re sharing information as we have it.

Last thing I want to ask you here, Tony, about getting yourself, someone getting themselves ready for 2024 would be about the pre-approval process. If I’m listening to this, and it’s end of 2023, and I’m thinking about buying a home, let’s say in March, April, sometime in the spring. What recommendations would you have in terms of when they should be thinking about starting that pre-approval process?

[0:28:04] ToU: Well, I think just what we touched on earlier, Tim, about making sure your margins and your budget, starting to plan now. For some people, it might make sense to actually engage a lender now, just because if it’s – if you’re talking about closing in March, April, or May, it’s coming faster than you think because you’re going to start looking at homes. You want to know you’re eligible for these houses. The other thing is, you may want to be under contract for 60 days. One thing I’ve always said, if someone has their house listed during the holidays, they are a serious seller. They want to sell that house. They’re having people through the house with your family, and ornaments up, and all that, you know they’re serious, and they’ll probably negotiate more.

It can be a good time to pick up a deal usually, versus the spring when there’s more people. But let’s just say, you’re waiting, and you may want to get pre-approved now if you go under contract in January or in sometime in February, and it’s a 60-day close or 45-day close. Your timeline I think depends on when you’re looking. If it’s in the summer, or May, or June, then maybe you wait until after the new year to get an actual pre-approval. But it’s never too early in my opinion, especially if you might have a credit issue because lenders have ways to like – we have a system where we can run simulations of what their credit could be. They pay certain things off. That’s been really valuable, not only in getting people approved, but also getting the better interest rates and better programs, getting someone from maybe 660 credit score to a 700, or 700 to 740. It adds a lot of value and I think it can take some time. That’s where I think pre-approvals are important to get ahead of it.

[0:29:49] TU: Let’s wrap up here by talking about the importance of knowing your lending options. Specifically, I want to talk about the pharmacist’s home loan product that you all offer at First Horizon. We talked about on a previous episode, 285, which was cracking the code on homebuying loan options. We’ll link to that in the show notes. We covered the variety of options that are out there from FHA, to VA, to conventional, to the pharmacist home loan.

One of things you already said, I think it’s really important point to reiterate, which is, when working with a lender, ideally, they’re helping you kind of understand what those different options are. To see based on interest rates, based on your credit score, based on cash available, what’s the loan option that makes the most sense for you? It might be for some, it’s an FHA loan, and they’re not thinking that that would be the best option. Or it might be a conventional, or perhaps it is the pharmacist home loan products.

Tell us about that offering through First Horizon. I think many people, if this is new terminology, they might have heard of doctor loans that are out there. Many of those lenders may exclude pharmacists or they might be available in certain states. One of the reasons we’ve been partnering with you guys for four-plus years now is the national reach. We know we’ve got a national audience that’s out there. Who is this product for, and what is the makeup of the product?

[0:31:05] ToU: Sure. The product that we offer to pharmacists, of course, you have to be a practicing pharmacist. You have to have to be in the field, and be actively working in the field to be eligible. The program really is not just for first-time homebuyers. This could be your third or fourth home. It just changes with the downpayment. If you’re a first-time homebuyer, I know we’ve discussed this in the past, but I’ll repeat it. It’s 3% down if you’re a first-time homebuyer. It’s 5% down if you’ve owned a home in the past, so those would be the two differences. There is no mortgage insurance. That’s a really big benefit. We really do not have a reserve requirement either, which is fairly significant as well.

There’s a minimum credit score of 700 on the product. Obviously, the advantages are not putting a lot of money down into the house, and having no MI I think is the big advantage. We’ve had a lot of folks who, especially over the last four years, who have taken advantage of this loan and put 3% or 5% down. Obviously, the values of homes have gone up, and they’ve really been able to get great investment in your money, get great return on their money. It’s been a really good program. But like we mentioned earlier about the market constantly changing, and the mortgage market evolving.

The secondary market, and how things have worked with trading, it was interesting. For some clients, their credit scores may not be really, really high, but it’s still good enough for the pharmacist product. Sometimes FHA loans have been unbelievably good, like the margin was so much better on the 30-year fixed pricing. We’ve been able to offer that. That wasn’t the case two years ago or a year ago.

We try to just look at what the market is offering us because sometimes, these other programs can be better if the rate is significantly lower. Anyway, that would be how we look at things. Obviously, the pharmacist products, the first thing we look at, if you’re a pharmacist, it’s the first thing we’re going to look at, but we will compare. Everyone’s situation is unique, and that’s why we will look at other options too. There’s plenty of other options that we carry.

[0:33:13] TU: The maximum loan amount on that right now is what, Tony?

[0:33:17] ToU: It’s 726,200, but I believe I’m about 90% certain, after Thanksgiving, traditionally this will come through. But I think we’ll be at 750 or a little higher by next year. I’m pretty sure it will happen. That’ll be the max loan amount. That’s the max the loan amount you can go to.

[0:33:34] TU: We’ll wait to update the website, so we’ll leave it.

[0:33:37] ToU: Yes, I would wait. If you think about that, someone’s looking to buy next year, potentially, you could buy $800,000 home with $50,000 down or less. That’s pretty good with no MI. That’s going to be on the table here pretty soon, I think.

[0:33:54] TU: So just to recap the highlights and we’ve got more information on the website, if you go to, yourfinancialpharmacist.com/home-loan. We’ll link to that in the show notes as well. You can see all this information and some additional resources. But 3% down for first-time homebuyers, 5% down if it’s not a first-time homebuyer, no mortgage insurance, 30-year fixed rate option, maximum loan amount of 726,200, potentially going up, and a minimum credit score of 700, available nationwide except in Alaska and Hawaii.

Great option for folks be considering. Again, the point you’re making is such a good one that, when working with a lender, you want to feel confident that they are looking at all the options that are out there. You’ve highlighted well that that can change, will change based on what’s happening in the economy and with the different products that are available.

Tony, as always this has been awesome. Really appreciate your insights for our community. If folks want to get connected with you and again, learn more about that offering, yourfinancialpharmacist.com/home-loan. You can click on Get Started, that will provide a quick questionnaire, and that will get you in touch with Tony and his team. So Tony, thanks so much.

[0:35:06] ToU: Thanks, Tim. It’s great being here with you.

[0:35:09] TU: Absolutely. Happy Thanksgiving. Take care.

[0:35:11] ToU: You too.

[END OF EPISODE]

[0:35:12] TU: Before we wrap up today’s show, I want to again thank this week’s sponsor of the Your Financial Pharmacists Podcast, First Horizon. We’re glad to have found a solution for pharmacists that are unable to save 20% for a down payment on a home. A lot of pharmacists in the YFP community have taken advantage of First Horizon’s pharmacist home loan, which requires a 3% down payment for a single-family home, or townhome for first-time home buyers and has no PMI on a 30-year fixed-rate mortgage.

To learn more about the requirements for First Horizon’s pharmacist home loan and to get started with the pre-approval process, you can visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com/home-loan.

[DISCLAIMER]

[0:35:56] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information on the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment, or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archive, newsletters, blog posts, and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward-looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements.

For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END]

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YFP 334: Philanthropy Unveiled: Strategies for Effective Giving

Posted on by YFP Media

Explore philanthropy insights with Tom Dauber, Founder of Abundant Vision, covering donor considerations, impact assessment, and affluent traits.

Episode Summary

Curious about donating to nonprofits and giving financial gifts in general? This week we welcome Tom Dauber, Founder of Abundant Vision Philanthropic Consulting. In our interview, Tom shares his knowledge gained from over two decades of involvement in fundraising initiatives and campaigns, offering valuable perspectives to consider when contributing to an organization or cause. He sheds light on the vital questions that prospective donors should examine before making substantial contributions, how to determine the alignment of the gift with the potential impact, and the defining characteristics of wealthy donors, including their career paths, educational backgrounds, and wealth acquisition strategies.

About Today’s Guest

Tom solicited his first “major gift” at age 17 and ran his first fundraising event the following year. After receiving his BFA from Bowling Green State University in 1998, he began his career in non-profit sector. Over the past decade Tom has directed teams responsible for $120M in fundraising initiatives and campaigns. his experience spans faith-based, health science and health system fundraising. From 2005-2019 Tom was the Chief Development Officer for The Ohio State University College of Pharmacy. During his tenure, he grew pharmacy fundraising revenue by 40% annually, taking them from $1.5M annually to over $10M. Tom oversaw alumni affairs, corporate engagement, communications and fundraising for the school and served as President of the AACP Advancement Special Interest Group. Today Tom is the President of Abundant Vision Philanthropic Consulting. He began the company to help small and medium size foundations benefit from high caliber fundraising expertise. Tom is a life-long resident of Central Ohio, growing up just outside of Columbus in rural Johnstown. These days he lives in Westerville, Ohio with his wife Tracey Papenfuss DVM, PhD. Together they have four kids, three dogs and two cats.

Key Points From the Episode

Tom dives into why giving is an area of passion for him.
He delves into key questions prospective donors should consider asking about organizations.
We explore the question, “Is my donation going to be tax deductible?”
His thoughts on gifts that are given anonymously and the pros and cons you should consider.
We talk about the concept of funds being specifically allocated to cover overheads.
Bunching donations to take advantage of tax benefits.
Tom highlights the themes and characteristics of those making large gifts.
His advice on what not to invest in.
We discuss the idea of there being many pathways to building wealth.

Episode Highlights

“The reason that I love fundraising is because I love giving. I love being generous, I love being able to help people. I love being able to make a difference.” — Tom Dauber [0:06:57]

“The beautiful thing about being able to participate in philanthropy is it gives you the opportunity to make a difference in situations that you might never be able to act otherwise.” — Tom Dauber [0:07:06]

“Fundraising, to me, is really just another form of financial advising.” — Tom Dauber [0:09:35]

“What we’re looking for all the time as fundraisers is where that person’s passion intersects with the mission of my organization.” — Tom Dauber [0:11:05]

“There are just so many things pharmacists can do with their degrees entrepreneurially that can lead to their success.” — Tom Dauber [0:38:52]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.8] TU: Hey everybody, Tim Ulbrich here, and thank you for listening to The YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I welcome a former colleague of mine, Tom Dauber, Founder of Abundant Vision Philanthropic Consulting. Tom shares his experiences from 20-plus years in fundraising initiatives and campaigns, to give our listeners insights of things they should consider when donating to an organization or cause. Tom outlines key questions that donors should get answered before making large gifts, how to determine the alignment of the gift with the potential impact, and defining characteristics of large donors including career paths, education, and how they acquired their wealth.

Let’s hear a brief message from YFP team member, Justin Woods, and then we’ll jump into my interview with Tom Dauber.

[SPONSOR MESSAGE]

[0:00:48.8] JW: This is Justin Woods from the YFP Team with a quick message before the show. If you listen to the YFP Podcast, you may learn something every now and then, either from Tim Ulbrick, Tim Baker, or one of our guests. A lot of people listen to this show but they may not execute or implement the things they learn. As pharmacists, we know the impact of nonadherence on patient outcomes and their overall well-being.

As a pharmacist myself and part of the YFP Team, I talk with pharmacists every day who are confused about how to implement financial knowledge. Pharmacists share with me that they are treading water financially, maybe took a DIY approach, reached a plateau, and are confused about what to do next, or those who work for decades can see the light at the end of the tunnel and feel uncertain about how the next chapter will unfold.

If that sounds like you, one, it is not uncommon to feel that way, and two, does it make sense for us to have a conversation to see if YFP Planning can help you? Visit yfpplanning.com or follow the link in the show notes to find a time that works for your schedule.

[INTERVIEW]

[0:01:54.0] TU: Tom, welcome to the show.

[0:01:55.9] TD: Oh, thanks Tim, it’s great to be here.

[0:01:57.5] TU: So, some background information and context for our listeners, our career paths crossed several years ago, back in – it must have been 2018, 2019 when I came on as faculty at Ohio State. At the time you were working in the advancement office at OSU College of Pharmacy and we had a chance to work together several times through that time period and then, just recently, a few months ago, I had reached out to you as we are starting a nonprofit called YFP Gifts.

We’re going to have more information for our listeners about that here in a little bit and I wanted to tap into your expertise and was just a great opportunity to reconnect with you but also, as you were sharing some of the work that you’re doing right now in your career, I thought, “Wow, what a great episode this would make.” As we can tap into your experiences on the side of receiving funds, receiving philanthropic funds, such that for those in our community that are making giving a part of their plan, they can take away some tidbits that would be helpful to that portion of their financial plan.

So, first and foremost, thanks for being here, and if you want to kick off by telling us a little bit more about your career background and the work that you’re doing now with Abundant Vision Philanthropic Consulting.

[0:03:08.7] TD: Sure. Back in gosh, it would have been the 90s, I wanted to start a club up at my school and I wanted it to be official and I decided since I didn’t have a job, I just needed to go ask somebody for the money and so, I went to a couple of different business people that I knew. One was my cross-country coach, one was my Sunday school teacher and I got one of them to give me 75 bucks.

[0:03:30.2] TU: Oh, that’s awesome.

[0:03:31.3] TD: And started an official chapter of my organization, it was exciting. That’s the first major gift that I ever closed and then shortly after that, began doing some fundraising of events for local things and just kind of worked my way through it, and then you know, when I graduated from Bowling Green State University.

[0:03:47.9] TU: Go Falcons.

[0:03:48.1] TD: I ended up. What’s that?

[0:03:49.7] TU: Go Falcons.

[0:03:50.2] TD: Yeah, that’s right. Go Falcons. You know, with my art degree there, really, I had some passions in my life that I needed to pursue outside of art, and so I ended up going to work for Central Howl Youth for Christ, works with youth here in the Columbus area, ended up going back to my hometown, and essentially starting a new branch of that organization out of Northwest Lincoln County. A lot of fundraising involved with that.

It was what I like to call a nonprofit with a capital win, so they really didn’t have much money, and so our salaries were appropriately sized compared to that, and as my family grew, got children, got married, well, opposite order there, got a mortgage and ultimately, I just couldn’t live on that salary anymore, and as I kind of tried to figure out, “What can I do? What am I going to do? I’m not going to make a living as an artist.”

And I realized that people actually pay you a reasonable salary to go raise money for them, and that was my entrée into the Ohio State University at the College of Dentistry, and so I spent seven and a half years there kind of working my way up from an entry-level position into Director of Development. So, reporting up to a senior director and after a good bit of time and having some success, I was given the opportunity to be the Senior Director there at the College of Pharmacy and that was 2012, 2013.

That was right on the tail end of Dean Brugamyer’s term there and transitioning into Dean Henry Mann and that’s when I went from kind of being the expert in oral healthcare to learning a lot from some wonderful teachers there at the pharmacy school. So, I did that from 2012 to 2019. Then, Ohio Health came calling and went to report there and ran an entire team of Chief Development Officers for that organization.

And then, you know, we had a kind of a string of layoffs there at Ohio Health and I was, you know, kind of one manager too many, I guess, and ended up stepping out of that position, and as I kind of weighed, “You know, what could I do professionally?”

[0:05:53.6] TU: Yeah.

[0:05:54.2] TD: I began to talk to some different organizations. I was really getting deep into some pretty exciting searches for some wonderful nonprofits and then, an opportunity came to work with a kind of a nationally known nonprofit but actually hadn’t really done much fundraising and did not really do much in the world of major gifts, and so with that in front of me, I pulled my name out of all those late-stage searches and decided to start my own shop, helping nonprofits figure out how to increase fundraising in their organization.

[0:06:25.9] TU: I love that Tom, and excited to tap into your expertise here during this interview. I’m curious to know, what led you to make your life’s work around giving, right? You talked about, you know, the importance of providing for your family, making a good salary, you know, you mentioned that very early experience, right? Your first major gift of $75 but I have always sensed that deeper for you, right?

You have this life’s work around giving and helping organizations. Why is giving an area a passion for you? Regardless of the area of the gift?

[0:06:56.9] TD: Well, you know, for me, the reason that I love fundraising is because I love giving. I love being generous, I love being able to help people. I love being able to make a difference and the beautiful thing, you know, about being able to participate in philanthropy is it gives you the opportunity to make a difference in situations that you might never be able to impact otherwise, you know?

I may not be able to personally bring a bottle of clean water to somebody in the majority world that’s struggling to have clean water but there are people that I can give money to who will make sure that those dollars are used in such a way to make sure that happens. To me, that’s like, beautiful.

[0:07:40.0] TU: Yeah.

[0:07:40.4] TD: You know, there are checks I write at the end of the year frankly, that bring me to tears to just have the privilege to make a difference in some of those places.

[0:07:49.0] TU: Yeah, that really resonates with me and I think it – well, our community as well, I have a sense that you know, pharmacists have a giving heart by nature, it’s just what draws people into the procession and one of the things I’ve really been passionate about and building YFP is that we know that if we can help someone really get their own financial house, their own financial plan in order, such that they feel like they’re on solid footing, they’re then in an opportunity and in a position to also be given at a greater level and that’s one of the things we’re most excited about with YFP Gives.

I’m teasing that a little bit but more information to come here in the future. So, for this interview, as I mentioned, I really want to use your experiences, your expertise as someone who raise funds, and all that you learned in accepting donations, talking with donors, setting up different philanthropic causes and funds, to then shift that perspective to those individuals that are looking to give and what might be some of those considerations as they make giving a part of their financial plan.

So, my first question for you Tom, is, what are those key questions? When you think about sending money to an organization, a nonprofit, you know, key things that we’d want to know about the organization prior to making that gift, and here, I’m also thinking that you know, if it’s an ongoing gift or if it’s a sizeable gift, perhaps these questions are more important. Although, I think in any case people want to feel good about where their dollars are going. What are some of the key questions that people should be considering?

[0:09:18.8] TD: Yeah, these questions scale no matter how much money you have. You know, the first thing, the really hard questions, their questions about you know, I mean, you’re in the financial advising world. I think a really good financial advisor, their first questions for you are going to be, “You know, what are your dreams and goals?”

[0:09:34.0] TU: Yup.

[0:09:34.4] TD: Right? Fundraising to me is really just another form of financial advising. You know, when I was working, you know, at OSU, there were all sorts of things that people could give to, say, at the pharmacy school. You know, they could give the natural products, they could give to pharmacy practice, they could give to scholarships, they could give to all these things, and so the first question for me in that scenario was, “What do you care most about?”

I remember talking to one community pharmacist, someone who had their own practice and they were talking to me about Dr. Biel and how Dr. Biel inspired them. Dr. Biel, for you listeners who don’t know, is this legend of natural products research, a pharmacognosy, who was so kind and so caring and students loved him, and so for that person, even though I expected, “Well, maybe this person would want to do scholarships” what I discovered was they were passionate about Dr. Biel and the difference he made in their life and so they wanted to make a gift that honored him, right?

So, that’s my first question, whether it’s a pharmacy school or somewhere else, “What do you really care about? What changes in the world would you like to see?” I have a good friend who is a master fundraiser. He is a mentor of mine and he often starts these conversations. He’ll pull out a pen, you know, hold the pen up and he said, “Let’s pretend this pen is a magic wand and you can use this magic wand to change anything in the entire world, just so it’s exactly the way you want. What’s that thing you would change?”

You know because what we’re looking for all the time as fundraisers is, where is that person’s passion intersects with the mission of my organization? And truth be told if you’re a good fundraiser, if you don’t see that intersection, you will less and release. You may even help point them towards an organization that can help them do what they want to do and honestly, that often results in gifts being made down the road because you demonstrate integrity to doing that but yeah.

So, you want to ask your people, “Tim, what are you passionate about? What changes in the world would you like to see and how could a gift really align with your deepest values? You know, what’s the thing you care most about?” And then you go from there to say, “Well, who are the organizations that I’m aware of that are making a difference in those areas?” So, those are the hard questions.

[0:11:55.2] TU: Yeah.

[0:11:55.5] TD: Then you’d get into the head questions and so those might be, how much can they afford to give? Another question might be, once they start thinking about that, another question that sort of might modify this, what’s the right asset for the gift? They may only be able to give so much in cash but they may have appreciated assets, maybe stocks, or maybe they’ve got a Rembrandt. I don’t know what they might have.

[0:12:22.9] TU: Yup.

[0:12:24.0] TD: But they may have something that might allow them to make a much larger gift. I think about a gift I was able to close at the pharmacy school. You know, it has this beautiful pharmacy practice lab, the biggest gift to that was olive product. In one of the reasons that gift was so large was because the company that made that product, it cost them less to make it.

So, the actual cost to them was less than the value of the gift but to us, we didn’t devalue it. We didn’t say, “Well, this half a million dollars and so in equipment that only cost you 200 to make.” We gave them the full credit of the half million and that’s the full credit the IRS will give you, right? So, maybe you’ve got grain, maybe you’re a pharmacist and you also are a farmer. You can donate that grain to organizations that can even turn around and sell that for market rates.

So, so there’s that and there’s also tax considerations that might come into play and I’m sure you’re well aware of those, Tim. There are going to be and oftentimes, this will intersect with issues of you know, stocks or things that have a higher net worth and what bought them for, those things are going to be things you want to think about, carefully.

You may want to take a loss in some years. Real estate can also be tricky and things to consider and then lastly, and this gets to maybe some of your other questions but does the organization to thinking have a track record of success in the areas they care about? If you’re going to make a big gift, I might let someone else experiment and see if the new kid on the block is the one to get it done. Unless you’re really persuaded, I might consider that.

[0:13:58.7] TU: Yeah. Great questions, and I love how you divided those, right? Starting with the heart, you know moving to the head, all things that people are thinking about when they’re making a gift and since you mention the IRS, let’s talk about that here for a moment. I think that many in our community, they do start with the heart when they’re giving but they’re also pharmacist, right?

They want to be efficient, they want to be making sure that they’re optimizing the tax part of their financial plan as well, and so this question comes up a lot around you know, “Is my donation going to be tax deductible?” And there’s not – all nonprofits as far as I know are not created equal, right? There’s C3s, which probably is what 501(c)(3) is most folks are familiar with but not every nonprofit is a 501(c)(3).

And so, there can be nuances here to consider as it relates to making a gift or making a donation. So, what should somebody be looking for or how can they know that their gift ultimately is going to be tax deductible? If that’s something that they’re really interested in.

[0:14:55.1] TD: Well, my specialty is definitely in the area of 501(c)(3)s and you can know for sure that if an organization is a 501(c)(3), that your gift to them is definitely going to be tax deductible. Now, to check, all you need to do is to go on the tax-exempt organization search site, the IRS and look up the organization by name or their EIN. The other thing that’s helpful about that website is you can also check their 990 and that 990 will also give you some sense for, you know, how much money they’re raising, which you know, may matter to you, that might inform you a little bit about the organization.

[0:15:32.4] TU: I like that. I’ve never actually thought about, you know, I’ve been in nonprofit organizations where I’m involved in the 990 filing, never have thought about it from the giving standpoint to go look up the 990, the organization. Makes a ton of sense. Giving gifts anonymously is something else. I’m interested to hear your thoughts on the – from the perspective of somebody in the organization who is receiving the gift. You know, I think that perhaps, there’s pros and cons from each side of a gift being given anonymously. What has been your experiences here?

[0:16:03.8] TD: Well, so, you know, there’s a lot of things – there’s a lot of reasons you may want to consider an anonymous gift. In terms of the pros towards that is first off, some fates told that there’s greater blessing in giving anonymously and I think there’s some truth to that for sure and otherwise, it can also be kind of fun to have a secret, you know? Nobody knows who gave this gift and you know, hopefully, involved with the organization and kind of have a little chuckle, right? About it.

You know, I think another reason people give anonymously though is because they want to avoid the attention that comes with a large gift. It’s because it’s true, all the nonprofits in the world and there’s what? 1.8 million, something like that, nonprofits, their feelers are out there, they’re paying attention to who is giving to whom in their communities, and the moment word gets out that someone made a gift, a lot of the other organizations like, if they have some connection with that individual, they’re going to be asking themselves, “Huh, I wonder if we can get in front of that person? I wonder if there’s a way that they might find something here that’s worth supporting” right?

You know, and when you give anonymously, you avoid all of that. I mean, it’s the same reasons why if someone wins the Lotto, they may want to just keep that to themselves, right?

[0:17:20.1] TU: Yeah.

[0:17:20.8] TD: So, those are some of the pros. There are a lot of cons though, I will say. So, if I want to truly make an anonymous gift, it’s going to be really hard to get good follow-up from the organization about the impact of your gift. One way that you could be successful in doing that is by going through a third party. Maybe you’ve got a financial planner or a lawyer, someone you trust that could make a gift to you, on behalf of –

[0:17:48.9] TU: Yeah, makes sense.

[0:17:50.2] TD: Make a gift to an organization on behalf of an individual. The nice thing with that is then you still have a contact person that you can follow up with and can say, “Well, hey, your friend doesn’t want to hear from us directly, could you please pass this information along to them about the difference their gifts made?” That’s a nice thing to be able to do.

Now, another issue, if you want to be receipted, if you want that tax deduction, the person doing the receiving has to know who you are, you know? Many organizations will keep it anonymous beyond that if you ask them, you know, like at large flagship universities, you say to them, “I want to make an anonymous gift.” Someone is going to enter in an anonymous record in the CRM for you.

That gift’s going to be assigned to that, not to your name as maybe an alum. You know, ultimately though, the person in the gift processing office, they will know who you are and will issue a receipt but I’ve heard of people sending boxes of cash to beloved professors.

[0:18:59.0] TU: That does not surprise me but it makes sense what you shared in terms of the pros and cons and you know also, at a minimum from the tax standpoint, making sure you have a receipt and you know, I like the idea of a third party if that’s something folks are interested in. I have a feeling most people, I could be wrong, you’re experience here, more than mine is that most people when they say anonymous, they mean anonymous to the community at large, I would think.

Whereas, you have any information for a receipt, record keeping updates, I think that would be really helpful. For example, if I made an anonymous gift somewhere, I’d be very interested in knowing the impact of that gift. I would be very interested in making sure I have the right documentation for tax purposes but that may just mean it’s not broadcasted that Tim made this donation for this cause. So –

[0:19:41.2] TD: That’s right. So, the terminology that a large foundation might use or a large nonprofit might use, they might say, “Do you want recognition for this or public recognition?”

[0:19:50.7] TU: Makes sense.

[0:19:51.5] TD: And so, you’ll have the option between being an anonymous donor typically, or at least, one that isn’t publicly recognized.

[0:19:57.2] TU: Yeah.

[0:19:58.9] TD: Because another benefit to being known by the organization is that it’s really fun to celebrate a gift with an organization you care about and it can be very meaningful to connect with the beneficiaries you’re supporting. I think about some of the scholarship students that I’ve had the opportunity to work with over the years and getting to see them, meet the people that funded their scholarship and they’re telling stories and there’s just all this positive feeling. That’s something I wouldn’t want to miss out on as a donor.

[0:20:30.1] TU: The other thought I had Tom as you’re just talking there is the potential benefit that comes from motivating and encouraging others. I would presume that giving can often motivate others giving.

[0:20:41.7] TD: Yeah, that’s right.

[0:20:43.4] TU: And so especially if there’s you know, colleagues or peers or others that may be in a position also give where their gifts are aligned with the same values and mission that you’re working towards, could the impact, right? The giving in the first place be greater as more people are aware of that gift. So, interesting things to think about there. This one Tom, I’ve always struggled to think, curious to hear you know from someone as a professional in the area.

Related to how some organizations promote a hundred percent or as close to that as possible goes towards the philanthropic efforts with little to no percent of the gift towards operating overhead expenses and I struggle with this because you know I think first glance as a donor you’re like, “Yeah, heck yeah, I want as much of my gift as possible going towards the cause” right? Whatever that cause may be.

But as I think about it in terms of like running an organization, there is and probably should be a reasonable and realistic amount of funds that are going to cover expenses that allow that organization to be an effective organization, which the ability to then distribute those funds wouldn’t be there with that overhead to some degree. Now, there’s a lot in between there, right?

[0:21:57.6] TD: That’s right.

[0:21:58.3] TU: So, just curious, your thoughts here, and how much does this comes up in conversation from donors?

[0:22:04.9] TD: Well, I love this question. You know, I brought it up, my wife and I were talking about it over coffee yesterday morning and I think we spent 45 minutes discussing it. It’s funny that you’re the one asking me though because it reminds me a lot of the pharmacy world. There are executives and retailers, who shall not be named, and they’re thinking about how effective is this pharmacy.

And they’re thinking about it in terms of, “Well, how much money does it cost us to run this pharmacy?” and so their response is to reduce cost in order to get a more effective pharmacy but then as you overwork your pharmacists, you understaff pharmacies, what do you end up having? You have a drop in quality care, quality outcomes, right?

[0:22:47.6] TU: Yeah.

[0:22:48.1] TD: And so, there is a real concern, a legitimate concern that there are people out there who start nonprofits where they’re taking 80% of the money’s raised and they’re paying themselves ridiculous salaries and not really helping people out and I think that’s where a lot of this conversation got started and so because of folks like that within my industry, organizations like Charity Navigator in the past have ranked nonprofits really on their cost to raise a dollar.

That is how much of the dollar that you donate is going to go towards overhead. So, that kind of creates really some problems, really some perverse incentives because you might have an organization that’s way understaffed. They’ve got their fundraiser, maybe they have one person supporting them. Rule of thumb in my profession, you might want two or three people behind the scenes for every one fundraiser you have to make sure that that fundraiser is used effectively, right?

So anyway, you might have a nonprofit that’s really operating on kind of a skeleton crew, really maybe not writing acknowledgment letters quickly because they just don’t have enough people to process the gifts, you know all those sorts of things could be happening and they’re going to look good on paper. They may even get an award nationally for being a really lean organization but in reality, because of that fear of investing in infrastructure, they’re not doing their job well.

So really, what you want to do in the same way, you know in your profession Tim, in pharmacy there, you want to look at outcomes. You want to look at evidence-based health outcomes. Well, with any organization, now each nonprofit is going to have a different set of quantifiable outcomes that they’re looking to get but those are the things you want to try to look at and now the trick is and you probably know this too in healthcare, it’s harder to get that number.

It is way easier for me as a nonprofit to just look at that cost to raise the dollar number and say, “Well, I’m done” right? Than actually getting out into the field, spending time evaluating results, and really trying to not just look at the front end but also the what are the backend kind of trickle-down consequences. I mean, we could, you and I could probably talk for hours about the money in having a pharmacist involved in healthcare saves.

But savings isn’t always considered a profit, right? So, it’s the same sort of question for both industries.

[0:25:24.3] TU: Yeah. It reminds me of school rankings, you know? It’s one of the things I’ve got beef with of like if it’s an easy objective number to capture you can quickly scale it, right? It creates “apples to apples” but it doesn’t, right? Because it’s not measuring the harder-to-measure softer components that really do matter and I think what you are sharing here is a great one and if you look at the cost of a nonprofit and what they’re spending and how far those dollars go that are raised, that’s a math equation, right?

When you get to the details of the impact and the stories you mentioned, kind of getting out to the field to really do some of that hard work, that takes a lot of time and it’s different of course, depending on the giving area that we’re talking about. So, great perspective there. I want to go back to the tax piece and we’ve talked a little bit on the show before, we had our CPA on the show, some of our tax professionals on our team.

And one of the strategies they talk about, which is often overlooked as part of the financial plan is bunching donations. So, depending on someone’s tax situation, depending on how much they’re giving, depending on the level of giving and the proximity of that to the standard deduction, this may or may not make sense but I think we’re going to see this coming up more and more in our community.

And so, is this something you would frequently see employed by those that were giving, where you know, they were bunching it where they might be giving every other year or at specific periods of time to be able to take advantage of some of those tax benefits?

[0:26:55.9] TD: I see what you’re saying. So, by bunching what you’re saying is, “I’m going to maybe I’ll upfront my giving because of some tax advantage” versus maybe later or I might delay it because of some other, you know, maybe an income bubble that I’m expecting, is that right?

[0:27:12.8] TU: Yeah, exactly, and if you know, we’re talking not major, major gifts. Obviously, there’s you know, different tax implications and parts of the financial plan to consider there. I’m thinking about you know, folks that may be giving 10, 15% of their income but when you think about that relative to the standard deduction, it may make sense where one year, they just take the standard deduction and then the next year, they double up on their giving to be able to really maximize it in that following year.

So, I was just curious, and maybe more broadly here like how often does the tax deficiency questions, become a part of the plan, or are those that typically in this position to give, they’re also working with a tax professional or a planner that’s helping guide them there?

[0:27:56.5] TD: Yeah, so if I’m eligible for the standard deduction and it’s not to my advantage to itemize, usually these are conversations that come up with a gift officer at a nonprofit. You know usually if I’m aware of someone who is thinking through a tax situation, it’s usually going to be with a higher-end donor who is thinking about for example, selling business and they know, “Hey, I’m going to have a big blip, a big raise in my income here in three years.”

You know, maybe they’ve got a structured buyout, on a dental practice or a pharmacy. I’m going to make a $50,000 pledge but I’m going to give you $5,000 a year the first couple of years and then the last three years, you know I’m really going to build that up or it could happen in reverse. You know, another interesting thing with taxes and those types of income bubbles that people don’t think about, and since you’ve got a big viewership maybe people will think about this down the road.

If you’ve got a privately held company and you’ve got privately held stock and you’re about to sell, there are some really awesome strategies and I’m no accountant, where you can give away some of that privately held stock to charities you care about or even to family members so that when that big income event happens when you sell, you don’t get nailed.

I mean, you’ve gotten rid of the assets before you’re taking the income, and so the nonprofit that you’re supporting is going to get this huge gift potentially without having to pay any taxes at all on it.

[0:29:37.1] TU: Yeah, because they’re going to get exactly, yeah.

[0:29:39.0] TD: But the thing is, yeah, you can’t do this though after the sale has gone through, so you’ve got to have this all worked out in advance. So, for any of your listeners that may have that happen, that’s something to think about now in advance of the fact.

[0:29:52.4] TU: Yeah, that’s really interesting and some I hadn’t thought about before but it makes sense, privately held companies, you have stock if you’re able to transfer that stock prior to the purchase, the purchase happens, dollars on the purchase go directly to the nonprofit, therefore, it’s not coming to you as taxable income. So, yeah, it makes a lot of sense.

Tom, the last question I wanted to ask you before we begin to wrap up is I think you posted something or maybe commented on something on LinkedIn a month or two that got me thinking about some of the defining characteristics of those that are making large gifts. You know essentially, what are those defining characteristics of the bigger gifts that are coming in from the folks that are “wealthier?”

You know, I’m thinking about what was their career path, like what is the level of education, or the trajectory of their education? Are there any themes that you’ve noticed through the years, decades now, right? I guess we can say of experience that you’ve had in those that are wealthy making large gifts and some of the characteristics of where that wealth has come from.

[0:30:55.7] TD: Absolutely. I guess number one is that employees don’t tend to do as well as business owners and that’s probably pretty intuitive. You know, the bulk of the folks that I have worked with over the years, have been dentists or pharmacists just due to the 15 years they’ve spent at OSU and I’ll tell you both professions tend to do very well. They come out making a strong salary.

But the ones who’ve really exceeded their peers usually have some sort of side gig or additional thing they’re kind of doing above and beyond their practice and so they’re taking some of their good income and not spending it but investing it in a number of areas and I’ll tell you some real patterns have come through that have been really influential on me like I’m a real estate investor today and part of that is because of all the dentists and pharmacists that I saw who are just doing fantastic.

I mean, my own dentist that I grew up with I never thought about it but his practice was in an apartment building on the first floor. Well, guess what? He owned the entire thing and even better, when he retired, he sold his practice and then converted his old office into a living place for him and his wife, right?

[0:32:07.5] TU: That’s awesome, yeah.

[0:32:08.2] TD: So it’s like really providing for himself. In retirement, he still got that monthly income from the other units not to mention the equity that I’m betting the building has a ton of equity at this. It’s in an area close to the new Intel plant that’s going in.

[0:32:25.4] TU: Oh, yes.

[0:32:26.3] TD: But I think of a pharmacist, you know, he is no longer in this world but everyone knows his name because it’s on the James Cancer Center but he started out building strip malls to put his pharmacy in, right? And now, he’s got a cancer research institute named after him because he realized that building strip malls could make him a lot more money than his pharmacy degree could.

Another pharmacist I knew started buying up commercial real estate in a college town and eventually, he sold his practice and this was – he was working more in kind of that golden age of independent pharmacy and all that but he ended up selling like so many did to one of the big chains. His kids, who were pharmacists, continued working in that chain pharmacy but boy, that family has a lot of generational wealth now because they still own really the entire main strip in that college town.

So, there’s all this income and all this equity that’s coming in. Now, another area I’ve seen health science professionals become very wealthy is through banking. I would think of one guy and he was starting a dental practice probably back in the 50s or 60s, it’s probably the 50s and the bank would have loaned to him to start a practice and he figured it out eventually but he ended up starting his own bank because he felt like the other bank, you know, they were a bunch of bums.

And you know eventually, that community bank gets purchased by a larger bank. The next thing you know, there’s just all these resources and I’ve seen that a number of times where people have been invited onto the board of a regional bank, and then that bank gets purchased and so you’ve got shares in it and you do very well. So, my advice to anyone listening right now is if you’re invited to be on the board of a community bank say yes.

Now, one thing I’ll tell you what not to do, don’t invest in a golf course, don’t start a golf course even if you love golf. This is purely anecdotal, I have no research to back it up but everyone that I have known that you know and pharmacists and dentists historically have been big fans of golf, they decided to start a golf course. It’s almost always lost their money, I’m just saying.

[0:34:31.3] TU: Interesting, yeah.

[0:34:32.4] TD: Yeah.

[0:34:32.9] TU: And you know, one of the things I visualize often and I think you describe this really well is many different pathways to building wealth, of course, right? There is no one right way but a visual that keeps coming back to me is a three-legged stool of business, real estate, and what I would call more just traditional investments, right? Traditional investments would be you know, your 401(k)s, your IRAs, your HSAs, your brokerage accounts.

Probably where many pharmacists might have the vast majority if not all of their investments in and then within real estate, as we talk about often on our Real Estate Investing Podcast that we publish, there are a ton of ways you can go, in real estate. Certainly not for everyone, whether it’s based on interest, risk tolerance, whatever may be the reason.

But the range of passive to active, right? There is a lot, you can to your comment about being the bank, you can be a hard money lender. Obviously, there’s risk involved there, pharmacists that are involved in syndications, pharmacists that are involved in short-term rentals, mid-term rentals, typical long-term buy and hold, fix and flips. I mean, there is just a myriad of ways that you can be involved, commercial versus residential.

And then on the business side, I’m a huge fan of not only business for the opportunities to uncap your income and take advantage of the tax roles, which are very favorable to small businesses, especially here in Ohio but also hopefully, to be building an asset that has an equity value that transcends the income you’re even earning in the business and that is kind of the makeup that I often think about is how can you put those three things together.

And you know, you may be able to not only diversify from those three legs but within those three legs, there’s also opportunities for diversification. So, I just loved how you described it. I think there is so many different ways and one of the take-home points I have there Tom, and you have a unique perspective being in the role, getting a chance to meet and talk with all these people, especially if you grew up in a traditional household, right?

We put our money in the bank, you buy a home, you put money in a 401(k), you get a good job, just go meet people that have done interesting things, right? And maybe some of those interesting things are more traditional. You know, they own a business, they buy real estate as the long-term rentals but more and more of those conversations, especially where you can see things that maybe aren’t within the realm of what you’re thinking, whether or not you choose to invest in those pathways.

You have the risk tolerance or you want to or you have the cash, it just opens up your thinking when you can start to have those conversations and you just came to mind as I thought about how many times when you are sitting across from someone where you personally gained, you’re like, “Oh, wow, that’s really interesting” right? That’s really cool wealth-building strategy and to be able to see that from you know, the point of the giver as well is really neat.

[0:37:23.2] TD: Well, and I know that your listeners are going to be predominantly pharmacists, the thing that you may not all see since you are kind of swimming, you know, in that fish bowl, your pharmacy is such a great degree to have. You know, when I think about like dentistry or even medicine probably to a lesser degree, nearly, I don’t know, probably 90% or higher of all the people with those degrees pretty much limited to practicing and that may include business ownership, which is great or teaching specifically in that career.

It was very rare for me to run across people that were doing anything out of outside of that profession. You know, when I went to pharmacy and part of it might be the fact that for the longest time, it was undergraduate degree for a lot of people but I saw this incredible diversity of individuals in all sorts of different fascinating careers like there is one guy that we interviewed for the alumni magazine and he developed a vitamin company.

You know, that became huge in Europe and he’s doing just great. He was a 1950s grad and everybody thought he was crazy and he’s laughed all the way to the bank, he’s been very successful. You know, not to mention the real estate people, there are folks in technology, you know there are folks with master’s degree that you know, you used to be associated with and that you have and he developed a very cool software company, right?

So, there are just so many things pharmacists can do with their degrees entrepreneurially that can lead to their success.

[0:38:59.0] TU: That’s great and we talk so much in pharmacy about networking from a professional standpoint but I also like to think about networking in the context of finances and the context of building wealth, right? There’s just so much to be learned, meeting people, reading, listening to podcasts, you know just learning about the different ways and pathways that people have done it before.

So, Tom, as we wrap up, what’s the best place that our listeners can go to connect with you and to follow the work that you’re doing?

[0:39:26.1] TD: Sure. Well, look me up on LinkedIn, I’m certainly visible there. I also have a website, abundantvision.net, it’s up right now. We’re actually working on a rework for it, so that will be launching probably the end of August but yeah, please connect with me on social media. I’d love to chat more with anyone that has questions about you know, how to give money away effectively or even you know, how they might want to you know, take steps to start a nonprofit.

[0:39:50.0] TU: Love it. Thank you so much, Tom. I really appreciate your time.

[0:39:52.5] TD: Great, thanks so much, Tim.

[DISCLAIMER]

[0:39:54.7] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information on the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blog posts, and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward-looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

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