Real Estate Investing / Podcast

YFP 365: Millionaire Theme Hour: From $0 to 7 Figure Pharmacist with Mike Byers

Posted on by YFP Media

Mike Byers, PharmD shares how he was able to achieve financial freedom and replace his retail pharmacist income through savings and real estate investments.

Episode Summary

In this episode, Michael Byers, PharmD shares how he was able to achieve financial freedom and step away from his job as a retail pharmacist at age 42. Mike outlines how he went from a position of financial weakness to a position of financial strength through frugality and real estate investing. A father of two young boys, Mike talks about the importance of having options and flexibility in this season as he and his wife raise their family.

About Today’s Guest

Mike Byers is a 2008 graduate of the University of Pittsburgh School of Pharmacy. He spent 16 years as a retail pharmacist for Giant Eagle where he worked as a staff pharmacist, a pharmacy team leader and a floater. After successfully investing in real estate for over 10 years, Mike decided to take a break from pharmacy in 2023 to spend time with his wife and two young boys. He loves his family, houses, outdoor adventure, and trying to find the right balance between YOLO and delayed gratification. He can be found on Instagram @DIYrentalGuy.

Key Points from the Episode

Pharmacist’s financial journey to seven figures, early retirement, and mindset shifts. [0:00]
Financial journey after graduation, including materialism, divorce, and saving for retirement. [5:59]
Saving money, investing, and finding balance in life. [13:58]
Real estate investing, personal growth, and overcoming setbacks. [23:17]
Building wealth through real estate investing and managing cash flow. [28:54]
Financial independence, real estate investing, and career development. [33:12]

Episode Highlights

“You have to be honest with yourself and say, what am I doing now? What is the result going to be? If I’m saving so much that it’s driving me crazy, the result is you’re going to go crazy. But for me, the end result was adventure.” – Mike Byers [20:51]

“I mean, just because you go down a path of a certain savings rate doesn’t mean you have to stay there, you can make adjustments.” – Mike Byers [21:41]

“What I’m looking at is that I have this money saved because I was diligent in being able to save, what does the next 10 years look like? Am I going to sacrifice weekends with my family and nights in order to have one or two extra million dollars?” – Mike Byers [32:07]

“And that’s something that you think about when you turn a certain age and you start wondering how much more do I really need to be comfortable after 65. I don’t want to be self-insuring myself if there’s an insurance product or an annuity that you can buy that would serve that same purpose.” – Mike Byers [32:52]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

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 episode we have a millionaire theme hour featuring Mike a 42 year old retired work optional pharmacist living in Pittsburgh, Pennsylvania. We discuss the highs and lows of his journey as he looks back, including how he felt trapped by big fixed expenses as a new graduate, why his early savings paid off big 20 years later, how his mindset shifted over time, why his real estate investing played an important role in his journey, ultimately replacing his pharmacist income, and why patience and short term frugality and sacrifice were key ingredients to his success.

Tim Ulbrich 00:41

Now, before we jump into today’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. And we’ll hear that on today’s episode. Yes, you’ve worked hard to get where you are, yes, you’re earning to get income. But if you ever wondered, Am I on track to retire? How do I prioritize and fund all of these competing financial goals that I have? How do I plan financially for big upcoming life events and changes like moving, having a child, changing jobs, getting married, or retiring? And perhaps why am I not as far along financially at this point in my career, as I thought I would be? The answer may be that your six figure income is not a financial plan. Yes, as a pharmacist, you have an incredible tool in your toolbox and that’s your salary. But without a vision and an intentional plan that good income will only go so far. That’s in part why we started your financial pharmacists back in 2015. At YFP we support pharmacists at every stage of their career to take control their finances, reach their financial goals and build wealth through comprehensive fee only financial planning and tax planning. Our team of certified financial planners and tax professionals work with pharmacists all across the United States and helps our clients set their future selves up for success. While living a rich life today. You can learn more and book a free discovery call by visiting yourfinancialpharmacist.com/learn. Again, that’s yourfinancialpharmacist.com/learn. Alright, let’s jump into my interview with Mike.

Tim Ulbrich 02:11

Mike, welcome to the show.

Mike Byers 02:13

Hey, I’m happy to be here.

Tim Ulbrich 02:14

Before we jump into your financial journey and the path of becoming a seven figure pharmacist, tell us more about your career in pharmacy. What led you into the profession? Where do you go to school? When did you graduate and the type that you have work you’ve been doing since?

Mike Byers 02:28

I think I started off like most folks going from high school to college, I went to the University of Pittsburgh. I started there. And of course, I was thinking about medicine, dentistry, pharmacy as my options and I was thinking about the path to get there. I don’t quite know what I wanted to do. My life kind of hit a roadblock sophomore year, I have a condition called ulcerative colitis. And I had to drop out of school at that time. And for a semester I was in the hospital for 16 days. And after the end of it and being in the hospital and experiencing things firsthand, I said, I think being a doctor is too hard for me. I think it’s it’s just not in the cards for what I have going on. And I didn’t know at the time that this disease wouldn’t be a huge part of my life. I found medicines over the years to control things. But I was also still dating my high school sweetheart at the time. And oddly enough, her father was a pharmacist. He owned an independent pharmacy. And I thought why not. So I finished my undergrad, I got a degree in economics and also a minor in engineering. And I went to pharmacy school from there.

Tim Ulbrich 03:54

And after graduation, those that are native to your area or where I lived for 10 plus years in Northeast Ohio, they’ll recognize the name Giant Eagle, but others will not. So tell us more about the work that you’ve been doing with Giant Eagle after graduation.

Mike Byers 04:09

Sure. So that was an exciting time to be in pharmacy school. I mean, you were going to school, you were learning things that were helping people and developing these skills and it was very fulfilling and the whole time, salaries were going up and you hear you would hear interesting things like the Alaska deal and all the things you’ve probably heard about it that time. But I did graduate and I worked for Giant Eagle. I was an intern there and stayed on as a staff pharmacist. I had some experience leading three different stores, which I learned a ton from and I was also floater and then staff again. So it was about 20 years from the time that I signed on as an intern to last year when I did resign.

Tim Ulbrich 04:59

Mike is a fellow 2008 grad. I graduated from Ohio Northern, I remember those times, right? It was the sign-on bonuses with the cars and classmates showing up with new cars in the parking lot and the Alaska deal, which I never saw on paper, but I heard of it as well. So we’ll share with our listeners, what is that all about? What I remember if it was, it was a big retail pharmacy chain that was offering a three year deal in Alaska for a million dollars. That’s what I remember the deal.

Mike Byers 05:28

The only thing I remember is sitting in class and hearing somebody turn around in their seat and say, I heard this. I heard a million dollars, three years. I’m gonna do it. And then I’m going to retire. Yeah, so maybe that planted the seed for some kind of early retirement financial independence at that point.

Tim Ulbrich 05:46

Nonetheless, it’s a very different time right here in 2024. So we’re going to dig into your current state of being a seven figure pharmacist achievement, financial independence, getting to this point of being work optional. We’ll talk about how you did that, and how real estate and traditional investments played into that. But I want to go all the way back to 2008 when you graduated with a net worth of zero, clean slate, no mounds of student loan debt, right, our listeners today are graduating $150k, $200k, you know, smaller debt loads, some might look at that and say, Hey, net worth, is your graduation, smooth sailing, but not so fast. Right? Tell us more.

Mike Byers 06:23

Yeah, before you throw tomatoes at the podcast, I did have a little bit of student debt. Which it was I mean, the difference between what I was making what I was spending, I can’t even remember how I paid it off. It was about $20,000. But I did go through a divorce, which cost some money, and I did have a real estate deal go south where I lost a lot of money. So I have had to dig myself out several times since 2008. But yes, I did. I did graduate with roughly a clean slate. And worked my way up to now where my passive income through real estate pretty much replaces my salary at 30 hours a week as a pharmacist.

Tim Ulbrich 07:13

What were some of the decisions, and we’ll dig deeper as we go throughout. But what were some of the decisions that you made early on as a new practitioner, you know, as it relates to car purchases and other things. You know, one of the things you shared with me prior to recording was that quote, “I became obnoxiously materialistic, which I partly blame for my marriage falling apart.” What do you mean by that? And how did this ultimately, you know, play into not only the financial plan, obviously the relationship but what would be the beginning of of, you know, that trench that you would eventually dig yourself out of.

Mike Byers 07:44

So like, like we mentioned, it was exciting times to graduate with bonuses. And we I graduated and I was married, we got married the last year of school during rotations. And we were living in her parent’s basement, not because we needed to financially, but because we weren’t sure where we were going to end up for her job. But I bought an Audi. A luxurious Audi. While it wasn’t even three months after I graduated, still living in my in-laws basement, bought this fancy new car. And it just seemed like the thing I was supposed to do. Long story short, I mean, we eventually moved. She got a job north of the city, we moved into a nice townhome rental. Not much longer after that, I’m on Zillow shopping for a nice, big, fancy house. So the fancy house came not much long after that. And I did become obnoxiously materialistic. And it wasn’t long after I moved into that house where I saw the house on the next street. He said, Gee, I wonder when or what it would take to get that bigger house. And that was just the way I was operating and had we not gotten divorced, I could still be operating that way. But it was just a mindset where I blame being really materialistic 10%. 90% we were young and ultimately not right for each other. But it wasn’t much longer after living in that house a couple of years where the bomb went off and divorced, trying to pick up the pieces again.

Tim Ulbrich 09:34

So you don’t go from that point to becoming a seven figure pharmacist by continuing that mindset and continuing those behaviors. So something shifted, something happened from a mindset and a behavior perspective. It sounds like that was the divorce. Tell us more about that.

Mike Byers 09:50

It absolutely was. I realized that I didn’t need a big house and a fancy car to be happy. I said the exact opposite – how little can I survive on? Or how little can I have material wise in order to live a happy life and I somehow found a studio apartment in the city, it was 350ish square feet. When my mom first saw it the first time, took her breath away, because it was just that small – the bedroom was in the kitchen. Yeah. And those were those were happy times. I lived that way for a couple years. And it felt really comfortable. But I still wasn’t saving. A couple years goes by and I’m like, well, kind of on this path where my rent is relatively cheap, my salary is relatively high. Why don’t I have a savings goal? Because I didn’t feel like I was doing the right thing at the time. So my goal that year, I think this was about 2012. So a couple years after divorce four years after graduating, I decided I wanted to save in addition to 401k, I wanted to save $2,000 a month. And each month I would play the game, if I wanted to buy something I worked extra. If it looked like I wasn’t going to hit my goal I cut back. And that’s what I did for that year to in addition to maxing out 401k to build up some cash savings.

Tim Ulbrich 10:11

So if I’m following correctly from jump street, you’re maxing out your 401k. So you’re leveraging the tax advantage account. And then you hit this point, shortly after the divorce four years into your pharmacy career. You’re in this studio apartment 350 square feet, and you realize, Hey, I’ve got an opportunity to more aggressively save. And so you set this target, which you know, to be on, I mean, $2,000 as a percentage of one’s take home pay, that’s a big chunk of money. And you see this a lot in the financial independence, retire early the FIRE community where there’s very aggressive savings rates, right, you’re in your early 40s. So to get to a net worth of seven figure plus, it’s going to take a substantial amount of savings to do that at an early age. So did your savings rate stay there? What did the trajectory look like as you were building that over time?

Mike Byers 12:21

So I hit that number, okay. And I was able to save about $25,000 that year. So I built up my cash savings. When I after going through the divorce, I didn’t have that cash savings. And I built that up and again, I kind of felt comfortable like, Hey, I hit that goal for that year, and I got a new apartment, that apartment had one bedroom. Not necessarily more happy in that apartment, but it was more expensive. And it seemed nicer. So at that point, it was a little more rent, and I wasn’t saving money and about a year had gone by and I said to myself, What am I what am I doing now? I mean, I had this surplus, and I was on a good path. So I for whatever reason started Googling. I figured it was taxes. I said I typed into Google, “single high earner how to save on taxes.” Okay, so real estate comes up. And I’d always been interested in homes. I love home remodeling and you know, watching a little bit too much HGTV at the time. But the next day, my friend came over to watch a football game. Oddly enough, he says my mom was thinking about selling the duplex. I had known him in college. And my ears perked up because why not? So, long story short, I fell ass backwards into owning a duplex.

Tim Ulbrich 13:58

Little house hack.

Mike Byers 13:59

Yeah. House hack. Yeah.

Tim Ulbrich 14:01

How did that one work out? Tell us about that is an investment property?

Mike Byers 14:06

I mean, it was it was a huge learning curve. So I said yes. I said I contacted his mom. We did the whole thing without an agent. It needed a lot of repairs and the whole thing flooded while we were in escrow. The pipes burst it was during winter the heat wasn’t on. So I had to jump into renovating and immediately kind of learning how to increase the value of the property. So I did that. And you know, I went from a studio apartment to half of a duplex even though it didn’t have air conditioning. It felt I mean, I felt amazing. I renovated it. It was nice. And I was just living in the duplex I was charging downstairs rent that mostly covered my mortgage. And it was shortly after that time when I discovered Mister Money Mustache. I’m sure a lot of people that you’ve talked to have started that or had that at some point in their journey. But that’s when things really started to go pretty quickly and I’d love to talk about that experience.

Tim Ulbrich 15:25

Yeah, and we’ll dive into that deeper and we’ll link in the show notes and Mister Money Mustache. For those that aren’t already familiar, I suspect many people are, great resource great blog will also link to other episodes, we talked about house hacking for those that that’s a new term. The idea is that you typically lots of different ways to house hack but you know, the most common we live in a duplex triplex or quad, you live in one unit, and you rent out the remaining units, obviously trying to generate income streams and hopefully cover a portion or majority of your mortgage payment in turn your what you think of often separately, your primary residence and then investment properties, bundle those together. And there’s some creative financing strategies of ways that you can, you can do that. And I want to come back in a little bit to talk more about real estate because I know it’s been such a big part of your plan. I do want to go back to the savings rate piece because I know you started with that $2,000 month goal. You shared with me in advance that eventually you’re pushing that up closer to $4000 to $5,000 a month. A lot of pharmacists hear these aggressive savings rates. And they’re like, how? Right, how? You know, you think of a typical pharmacists income, take home pay $7000 to $7500, maybe $8,000 a month, depending on what they do. You look at large fixed costs, like house, cars, student loan payments, daycare, childcare, other expenses. And we work with many pharmacists where there’s just not a whole lot of margin, at least in current expenses. So give us a little bit more of the behind the scenes of how you were able to actually allocate a large percentage of your income? What sacrifices did that require? And then where were you putting that money? I heard early on it was cash savings beyond the 401k. But was that in IRAs? Was that brokerage accounts? Where were you putting that money?

Mike Byers 17:13

As far as stocks and retirement accounts, it’s just 401k. The Roth and the traditional just, I was saving so much at the time, the income limits, and then the limit that you could put in just seem too small for me. So how do you save? I mean, you mentioned that the three biggest things housing, transportation, and whether or not you have kids, I guess your third one would be food? If you don’t have kids, that third one, if you do is day care. Yeah. So house hacking. That’s the big way to save on your housing costs. So at one point, my housing costs were zero, because the rent went up. And I was saving at that time, I had paid off the loan on my car, and I kept it. So a lot of folks will pay off one vehicle and buy in the next or keep buying new vehicles that are pretty, pretty frequent pace, but if you keep your vehicle eight, nine, ten years, when you get to that point, it’s paid off. You can save a lot of money. So I was saving probably in the realm of $5,000 a month. So that included a paid off vehicle. It included rent from downstairs, a little bit of overtime manager salary. And saving on food. I mean, just not going out to eat a lot. That was a big thing for me. I mean, you can play the game where you get pretty extreme. And it was too much for me. I mean, there was one point where I was calculating the cost of the extra food I would have to consume to walk to work versus the cost per mile of gas if I had driven so what I was doing with that $5,000 a month, I was putting it all in my checking account. Okay, fine. It was just building out pretty quickly. I called the mortgage company and I said, hey, this PMI insurance. I have, you know, a certain amount of equity at this point. Can we make that go away? And they said no. I said why? And they said, Well, this is an FHA loan.

Tim Ulbrich 19:26

Yeah, right. Did it. On my first home. Didn’t know that.

Mike Byers 19:30

Yeah, blame myself. I blame the mortgage seller, whatever. I was so angry by that. And I was saving so much money that I paid off. I think it was $100,000 loan balance relatively quickly, like within a year and a half. Just because I was mad about that. And I wanted to make $120 a month go away. So I was putting it back into the real estate.

Tim Ulbrich 19:55

Got it. Okay. You mentioned something really interesting. You talked about of extremes, right? And you see this sometimes in the FIRE community and and let’s, let’s say out there and everyone’s on their own journey, everyone’s situation is different. You know, everyone’s cost a living expenses are different family situation is different. So everyone has to figure out what is the journey and pathway that allows them to achieve the goals that they want to achieve. But those that are on this financial independence, retire early or retire optional journey, you know, there is what you call the potential for this frugal fatigue. Right. And I love that term, because it’s real. And there’s a time and season for it, for that grind. And there’s a fatigue that comes with that as well. And so, my question for you is, how did you combat this? When you recognize that? What did you do to say, Hey, this is real, and I’m achieving all these great goals, and I’m saving a lot per month. But this fatigue is real. How did you combat that fatigue?

Mike Byers 20:51

I mean, you have to be honest with yourself and say, What am I doing now? What is the result gonna be? I mean, if I’m saving so much that it’s driving me crazy. The result is you’re gonna go crazy. But for me, I would. For me, it was adventure. So when I got pretty fatigued with the daily saving, and it wasn’t like I was living this life where I was, you know, things were relatively scarce and I wasn’t having fun. But at time, like I bought an Airstream when you’re holding back so much, and you’re just kind of yearning for adventure, you see a commercial for the new Airstream. You just buy it. And you can adjust. I mean, just because you go down a path of a certain savings rate doesn’t mean you have to stay there, you can make adjustments. I ended up selling it a few years, a few years later. And the money that I lost, I guess you could say last was a great experience. So you just keep adjusting yourself and you have honest conversations with you or with your spouse if you’re married on okay. What are we saving? What experiences aren’t we having? Right? What is that going to result in in the future? Because you could have two different ends of the spectrum. You could have YOLO. And I know people like this and they’re happy. You only live once, they’re spending their whole paycheck. They’re not thinking too much about the future and holding back on some things. They’re just living life now. But there’s the other end of the spectrum, which is deferred gratification. Yep, either one of those two, seems a little extreme. And you could get screwed either way. So if you’re YOLO, and not saving anything, and leveraging all your salary and income to have fun today and you live to 100. I mean, you could be screwed. Sixty-five When you start to not have energy and ability to work, I mean, yep. But if you defer everything and you die at 50, you’re screwed as well. So you have to find your balance in the middle and continually be honest with yourself and have the conversations with your spouse on what the right balance is.

Tim Ulbrich 23:17

Ton of wisdom there, Mike. And there are several resources that are coming to mind that I feel like of what you shared. You’re kind of pulling from, you know, some different philosophies and putting it together. What we often say is, hey, we’ve got to figure out how we can save and invest for the future to take care of our future selves, but also live a rich life today. Both of those things can happen and be true. While that looks different for everyone. And, you know, I’m thinking of some of the resources that have influenced my journey. Rich Dad, Poor Dad, The Millionaire Next Door or Die with Zero by Bill Perkins.

Mike Byers 23:45

I just read that.

Tim Ulbrich 23:47

Bigger Pockets. Like, I kind of hear a little bit of pieces of these. And what I love is you’ve taken these teachings, and probably many others, and said, Hey, this is what is ideal for me and my journey. And I think the way you articulated that is beautiful, and I want to talk more about the real estate. So 2012 You buy the duplex sounds like that was a good move in the house hack. You weren’t a one and done real estate investor. 2019, you decide to do a deep dive deeper dive into real estate beyond that initial house hack, which ultimately, when we talk about current state would allow you to cut cut back your work altogether to replace that income, but initially go from that full time to less or full time 30 hours a week. Where did that motivation and drive come from? Do that deeper dive in real estate and tell us more about that second investment, the one that you you kicked off in 2019.

Mike Byers 24:41

So I had lived in the duplex for about five years 2013 to 2018. I had gotten out of a four year relationship at the time and I’m driving to visit my brother in Sioux Falls, South Dakota. It’s pretty long drive so I’m doing a lot of podcasts listening and I discover some things was about real estate. So again, I was kind of on the path. But I listened to some information on podcasts that said, well, you have another opportunity to continue down this path. I mean, I was sit still saving a bunch of money living there and earning a good salary. By the end of that trip, I decided that I wanted to buy another property. I wanted to continue, there was no, there was no reason not to grow this. And at that time, I felt like I had a little more tools and resources and experience to go down that road. So I bought another house, I was able to pay cash without a loan because of my savings rate over those last five years. And I lived in it, renovated it. I rented it out for a decent price. And I hit a certain number that I wanted to hit. And I thought I was the King of Real Estate in Pittsburgh. I bought another one. And before I was finished with that one, and ultimately ended up in another low point in my life where I just had too much going on. And I ended up selling that for a loss because it was just too overwhelming. But I, you know, these are the things you think about long car rides and long bike rides. It’s like what is the purpose of what I’m doing? And I had said to myself, I have this duplex, it has the opportunity to give me two rents. And I have the opportunity, because nothing’s really tying me down, to buy more real estate. And I think in order to do that, I need to cut back hours. So eventually, I asked to be cut down to 30. I got a really great store where I work three days a week, every fifth weekend. So that gave me the time and the freedom to eventually build more real estate. And the salary that I’ve lost over that amount of time, it’s, it’s really not a big deal. Because what you’re able to build with your time, or the freedom that you’re able to have is worth the cost.

Tim Ulbrich 27:17

In terms of your portfolio, you started with the duplex, you buy another one in 2019. Sounds like that goes well. The one after that not so much. You mentioned a low point, what what did you do to kind of pick yourself back up and say, Hey, maybe I’m not the king of real estate in Pittsburgh, but I also have something here to offer. And I think I’m on to something in terms of building some real assets here. How did you get out of that trough and really get yourself back in the game?

Tim Ulbrich 27:46

And then that portfolio, the current day portfolio you just mentioned, has gotten to the point where work is optional. So you went from 40 hours a week to 30 hours a week. And now that portfolio is generating income such that if you need to, want to work in the future great, you can or if you want to pick up extra hours, but you’re not in a position of needing that income.

Mike Byers 27:46

I mean, thank God, I met my wife at that time. Because she gave me the confidence and believed in me. And I’m the type of person that if someone believes I can do something I could, I could climb a mountain pretty easily. Amazing, amazing luck that I found such an amazing person. And she believed. She knew what I had done in the past with the single family home and the duplex and the skills that I have built and the knowledge that I had built during this time. And sometimes all you need is a partner that can believe in you and do it with you. So we basically went on a buying spree and use the equity in those two homes to buy four more homes and rent those out. And that’s what our portfolio looks like today. Four single families and a duplex plus our primary house.

Mike Byers 29:14

Exactly.

Tim Ulbrich 29:15

Okay. Yeah, man. That’s awesome. Congratulations on the journey all the work.

Mike Byers 29:20

Yeah. So that was a goal. And things change when you have kids. And we had two children born pretty close together. And we were coming towards the end of my wife’s maternity leave for our second child and we were deciding what to do and it was a decision for me to stay home and not work. And the investing in assets and growing those assets and having those assets give you a return to buy more is what allowed us to have a one income family.

Tim Ulbrich 29:58

And your boys are how old now?

Mike Byers 30:00

They’re one and two.

Tim Ulbrich 30:01

All right. All right. So you’ve got options for time and flexibility schedule with them. That’s cool. If we zoom out for a moment, and look at your pathway to becoming a seven figure pharmacist, and now looking at your asset base as a whole, not specific numbers, but just general percentages, if you were to break that down between, you know, more traditional, right 401k types of dollars versus the assets that you have in real estate, or potentially others that I’m not yet aware of, like, how is that net worth broken down?

Mike Byers 30:36

I would say 60 to 70% real estate. Probably 60% of real estate. And then the rest is in 401k.

Tim Ulbrich 30:46

Okay. Okay. And we haven’t even touched on obviously, a whole nother aspect of the real estate, you know, you’ve got your cash flow you’re generating now there’s future appreciation, there’s tax advantages, if anyone wants to dive into that deeper, Tax Free Wealth by Tom Wheelwright, great resource to kind of just open your eyes a little bit if, if that’s not something you’ve you’ve considered before.

Mike Byers 31:08

I mean, for our real estate specifically, I mean, if you think about it, there’s three, three or four different ways where you make money. So there’s cash flow, there’s appreciation, and there’s loan pay down. So what we shoot for with our properties is $1,500 a month. $500 is $400 or $500 is cash flow. $500 is being paid down by the tenant and then above $500, is appreciating, and when you multiply that by several properties, you get that automatic savings in those two parts, you get the automatic savings where the tenant is paying it down, and it’s appreciating in value. And then you can use the cash flow to reinvest or if it’s a different season of your life where you need to live on cash flow, you can do that you can take a break from work, you can take a sabbatical. And it’s it just provides you options. Right now, what I’m looking at is, what kind of options has what I’ve built in the past, giving me to live a great life with like I, like you mentioned the book Die with Zero, you get to 40 years old, and you start thinking, Okay, I have this money saved because I was diligent and being able to save, what does the next 10 years look like? Am I going to sacrifice weekends with my family and nights in order to have one or two extra million dollars? You know, maybe your kids and your spouse they want you home? So that you know you can you can live a different life with experiences. And that’s something that you think about when you turn a certain age and you start wondering how much more do I really need to be comfortable after 65. I don’t want to be self insuring myself if there’s a maybe there’s an insurance product or an annuity that you can buy, that would serve that same purpose.

Tim Ulbrich 33:11

And options is the word I hear. Flexibility is the word I hear. And it’s interesting when I polled our community about the idea of financial independence, whether or not they want to retire early. You know, some people love what they’re doing. Some people don’t like what they’re doing. Some people might want part time or to pivot. But the goal of financial independence, I think, is one that resonates with people as a whole. And when I asked that question, you know, what excites you? What motivates you around that concept of financial independence? It’s options. It’s flexibility. It’s being able to choose and to have choice in those things along the way, which I think your story is such a good example of that as well. Mike, when you look back on this journey, and one of the things I appreciate is in the transparency and the vulnerability. You know, we could look at the current state and say Mike is crushing it, and you’ve done incredibly well. But there’s been highs and there’s been lows along the way. And there’s been a lot of learning that’s happened. As you look back on that journey from net worth of zero to becoming, you know, well into a seven figure pharmacist, what lessons do you take away as you reflect back on that, that you can share with our listeners?

Mike Byers 34:20

I think a good lesson to learn is have honest conversations with yourself about the alternatives. So if you’re on the path, and you’re making and not saving, if you’re making a certain amount and you’re not saving a whole lot and you get to the point where maybe you’re thinking there’s something more I can do. Maybe I can save a little bit more or maybe I can make investments outside of my 401k, they’re gonna be a good return and give me cash. flow like real estate. Just have honest conversation about what the alternative is. Because sometimes the alternative is you get stuck for a long period of time in what you’re doing because you didn’t take those five years to save diligently, or to pursue something that you’re interested in as far as a side hustle or take that job. So I sit down, evaluate what you’re doing and what path you’re on. And where that’s gonna lead to 10, 20, 30 years down the road. Five or 10? Whatever.

Tim Ulbrich 35:44

Yeah, and I hear a lot of patience in your story. I hear a lot of, you know, seasons of sacrifice, but also seasons of perspective, and kind of reevaluating where am I going? What are we trying to do? I’m curious, as you look out, you mentioned this time window into the future, as you look out, where do you see your real estate portfolio going? You know, now that it’s gotten to a point of replacing your income, do you see yourself kind of staying put in this model where you’ve got a duplex and several single family homes? Do you see an expansion within that same investment category? Are you interested in, you know, commercial or short term rentals? Like, what? Where are you envisioning the future of the real estate portfolio?

Mike Byers 36:23

So I’m envisioning, I mean, my, my vision is to work on it three to four hours a day, from a coffee shop and manage the investments. So I wish I could give you a better answer. And part of stepping back from the pharmacy job and trying new things is this level of uncertainty and really uncomfortability like, things aren’t amazingly comfortable right now. I mean, I’ve really had to unwind some of the programming that 20 years of retail pharmacy put in me, so it’s tough, and I can’t tell you exactly where I want to be in this is a period where I am. But I mentioned the word sabbatical. So it’s, it’s a period of time where you’re not forced to work, where, you know, thank God, my wife is just so amazing and understanding. You can take the time to figure out your next path. And instead of working nights and weekends for the next 10 years to figure out how to have your kids experience and watch you live an amazing life. So that’s an evolving thing. And maybe we’ll catch up in five years, and I can tell you what it evolved to. I you really have to think about what your passion and purpose is. And sometimes you look at 100 jobs on on LinkedIn or Indeed, pharmacy/medical related and you just can’t see yourself doing that. So I’m trying to find my passion and purpose right now. And I really think it is in real estate, whether it’s rental real estate, commercial, vacation rental or flipping. I’m trying to figure that out.

Tim Ulbrich 38:19

And what excites me about that is I sense this is a season of, you know, some of that deep reflection and figuring out the next steps. You use the word sabbatical as well. But you know, another tip of the cap to the work that you’ve done, you’ve put yourself in a financial position, with the support of your family to be able to take the space to think and think strategically, right? And that’s an amazing opportunity, but it didn’t fall in your lap. You worked incredibly hard for that to happen. So congratulations, Mike on on the journey. I do look forward to following up and following your journey. Along the way. I know it’s been an inspiration to me, I’m sure it will to our listeners as well. So thank you so much for taking time to come on the show.

Tim Ulbrich 39:01

As we conclude this week’s podcast, an mportant 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 in 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 Is 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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YFP 303: How This Pharmacist Paid Off $115k in Two Years

Posted on by Caitlin Boyle

Dr. Donisha Lewis talks about her debt-free journey, why and how she got involved in real estate investing, and how she and her husband got on the same page to achieve their financial goals.

About Today’s Guest

Dr. Donisha Lewis is a clinical pharmacist at an ambulatory care facility where she collaborates with providers of the Hematology/Oncology and Internal Medicine departments to create treatment plans for patients. She attended the University of Louisiana at Monroe College of Pharmacy where she received her Doctor of Pharmacy degree in 2011. During her career as a pharmacist, she has served patients in the community, inpatient, specialty, and ambulatory care settings. She is also a real estate investor alongside her husband. She enjoys traveling, spending time with family, and volunteering.

Episode Summary

This week on the YFP Podcast, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, welcomes Dr. Donisha Lewis to the show to discuss her debt-free journey. During this episode, listeners will hear the how and why of Donisha’s path toward financial freedom, how she got her start in real estate investing, and how she and her husband got on the same page to tackle $115,000 in debt in just two years. Donisha shares her pharmacy story, what drew her to the pharmacy profession, and her financial picture upon graduation from pharmacy school. With plans to tackle her $99,000 in student loan debt as soon as possible, her mindset and approach to debt payoff were critical in achieving this goal. She shares practical tips and tricks from her experience in paying off a combined $115,000 between herself and her husband, and advice for recent graduates who may not have started making payments on their loans due to the student loan pause. Making sacrifices while remaining realistic, Donisha built a budget that allowed her and her husband to combine the snowball and avalanche strategies. Using her budget, she identified wasted spending and analyzed her savings to determine the amount she was comfortable contributing to the debt payment. Tim and Donisha talk about the importance of having a shared financial vision with your partner and the benefit of having varied strengths in personal finance.

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] 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 Donisha Lewis onto the show to talk about her debt-free journey, why and how she got started in real estate investing, and how she and her husband have been able to get on the same page to achieve their financial goals. If you’re interested in learning more about working one-on-one with a certified financial planner may help you achieve your financial goals. You can book a free discovery call at yfpplanning.com. The team at yfpplanning includes five certified financial planners that are serving more than 280 households in 40-plus states. YFP Planning offers fee-only, high-touch financial planning that is customized for the pharmacy professional. Whether or YFP Planning’s financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom. Okay. Let’s jump in our interview with Donisha Lewis. Donisha, welcome to the show.

[0:01:02] DL: Thank you for having me.

[0:01:04] TU: Well, I am really excited for this conversation. You and I connected via LinkedIn through a mutual colleague, Dr. Jerrica Dodd. After we connected, and I learned a little bit more about your journey as eager to share your story with our listeners. So we’re going to dig into your debt-free journey, paying off the student loans. We’ll talk about some real estate investing as well. But before we get into all of that, let’s start with your career journey. Where did you go to pharmacy school and what led you into the profession?

[0:01:34] DL: Absolutely. I completed my pharmacy degree at the University of Louisiana at Monroe, back in 2011. As a child, I wanted to be a pediatrician, actually. My mom actually put me into a program, at the time, you could kind of shadow physicians. We didn’t shadow them seeing patients, but just the day in the life when they were doing their office hours. We went up to the operating room, and I saw all the tools and I just said, “You know, I have to find something else to do, because this is pretty intimidating.” I didn’t really want to perform any surgeries. I really didn’t think that I wanted to do anything that had that much patient contact as it related to doing surgery, stitches, anything like that. That really made me reconsider being a physician. So I started researching other medical professions that weren’t as hands-on, if you will. That’s when I came across pharmacy.

I actually have an uncle who’s a pharmacist too. That led me to the profession. I was still able to interact with patients, but not necessarily be as hands-on as I would have been as a physician. That’s what led me into the space.

[0:02:44] TU: I can relate to that. I went into pharmacy right out of high school and I was interested in medical professions at large. But the whole blood thing, you know, kind of scared me away. You hear that story often with pharmacists. One of the many reasons. I’m not sure that’s a great reason not to go into other ones, but it was an important one for me at that time. Tell us more.

So you graduated 2011. Coming up on your 12 years out into the profession, what have you been working on this point since graduation? I understand you’ve had experience in community practice, ambulatory care, a little bit in management as well. Give us that career journey over the last decade or so.

[0:03:22] DL: Sure. I began my career with one of the large retail pharmacies. I stayed with them for a little while. Then, during my time with them, I was able to get a PR, inpatient clinical pharmacist position, so I was doing both. From there, I was able to transition into a specialty pharmacy role, which was within a hospital practice. I like to say it was a combination of outpatient community pharmacy, as well as some inpatient clinical pharmacy. I really enjoyed that role. Now, I’m with an academic-based practice, and I’m helping them expand pharmacy services there. I am in a clinical role there, and we are expanding our services throughout the practice. We have some collaborative practice agreements in place. I’ve also started an ambulatory care clinic with the Department of Internal Medicine, and we’re launching specialty pharmacy there as well.

[0:04:16] TU: Wow. I love it. I love it. Some of our listeners, especially those that have graduated here in the last five or so years. I graduated in 2008, so we’re pretty close in that timeframe. When you and I graduated, student loans were – they were a thing, but they weren’t as big of a thing as they are today. We see lots of graduates coming out with you know, $200,000, $250,000 of student loan debt. Average right now is about 160,000. I think sometimes, when we talk about our own journeys, 10, 12, 13 years ago, people were like, “Oh, well. That was only $100,000.” It’s like context, context of what pharmacists were making at the time, as well as – that’s still a substantial amount to pay off. I think we’ve become a little bit numb to the indebtedness and the debt loads that are out there.

Let’s talk about your student loan journey. Give us the juicy details. How much did you have upon graduation, and what was your mindset at the point of graduation about how you wanted to approach the student loan debt?

[0:05:20] DL: Sure. When I graduated, I came out with right under $100,000 in student loan debt. Like 99,000 and some change is what I owed. For me, when I came out of school, we were at the end of the shortage, approaching really a saturation of pharmacist. One thing that I wanted to do was definitely be conservative in my spending because of that, but also not being comfortable with that type of debt that really led me to make decisions. Basically, like I was still a college student, related to my finances. I’m sort of grateful for that time coming out of school. It was an interesting time, because I saw a pharmacist when I started pharmacy school being offered all these incentives, and bonuses, and that stopped.

As soon as I graduated, those bonuses, and all of those incentives, they stopped. That’s a very big difference. I heard of people getting these extremely, just extreme amounts of bonuses, cars, all these things. For all of that to stop, I really wanted to be very cautious in my decision-making financially, because I really wasn’t sure what the future of pharmacy was at the time. One of the things to do with obviously, live below my means, but also reduce this debt. That was very important to me. With that large number, though, it’s intimidating.

Like you said, nowadays, 99,000 is not that much, unfortunately, for a lot of pharmacy grads. But to me, that was a lot. That was the framework, the mindset. I really did not want to have that debt looming over me like that for an extended amount of time.

[0:07:07] TU: It’s interesting to hear you share the timeframe you were in. I graduated in 2008, which was still at the time sign-on bonuses. We’re happy. I remember I made the decision to go do residency. I was going to make a whopping $31,000 salary all the while. Cars and sign-on bonuses we’re having. I remember one specific offer that was out there. It was one of the big chains that was offering a million dollars to go work in Alaska for a three-year deal.

[0:07:31] DL: Wow.

[0:07:33] TU: I remember, I mean, times changed significantly. You saw that happen, you graduate in 2011. We’re actually swinging back into some of that right now, which is an interesting discussion for another day. But you said something that I want to dig into a little bit deeper, which is, I’m not comfortable with that amount of debt, right? Whether the number was 99, or 150, or 50, I get a sense that just overall, you wanted this debt off of your shoulders. Tell us more about that, because I will talk with some people, Donisha that will say, “Hey, I’ve got $250,000 of debt.” And you’ll see a range of emotions to that debt. The number can be the same. In one instance, the house is on fire, it’s causing anxiety, it’s causing a lot of stress, and worry.

Then the other end, it might be, “Nah, it is what it is. It will kind of take care of itself over time.” Where was your motivation, your mindset around, “I want that off my shoulders”? Tell us more about why you felt that way.

[0:08:31] DL: Sure. For me, I, as a pharmacist, we have the actions to work part-time jobs, or pick up extra shifts and all of these things. Initially, I was thinking, “Oh, I can do that when I want to do extra things.” But I realized that that wasn’t very fun working all the time, so that was extra motivation to really have that time back and not feel like I had to work so hard in so much because I had this amount of debt. I felt like I couldn’t really do much else, because I owe someone else all this money. For me, personally, that’s just my belief with that, I really wasn’t comfortable making more decisions and making big purchases, and really moving my life forward the way that I wanted to, because I owe this large amount of money. It was really uncomfortable for me, but I do know, you know, like you said, other people, they’re totally comfortable with it. They’re like, “Well, hey, I’ll pay it off eventually.” But I just wasn’t okay with that, and I initially scheduled my student loans for a 10-year pay off. But even with that, I was like, “This isn’t going to work. Let’s speed this up.” So that’s what happened.

[0:09:37] TU: Yes. I would really encourage the listeners, especially those that are listening, that our students are just getting started. When it comes to the financial plan, I think what you’re highlighting so well here is there’s the objective numbers part of it, how much debt, what’s the strategy, what’s the plan. But then there’s the emotional side of it as well, which is really important. Folks often talk about how much a personal finance is behavioral. As each year goes on, I’m believing that more, and more, and more. There’s so much to be said about acknowledging the emotional side, the behavioral side of financial planning. There is no right or wrong answer. That’s I think it’s so important to communicate that, whether you are someone that looks at debt, and you have a lot of aversion to it, and it’s causing you stress, and it’s causing anxiety, like honor that. Honor that and develop a plan around that.

For folks that feel differently, making sure you’re finding a way to mitigate the risk, but just understanding having the self-awareness of where you are, emotionally in terms of viewing different parts of the plan.

[0:10:35] DL: Absolutely.

[0:10:37] TU: Donisha, I’m curious to hear your perspective. We are now approaching three years since the beginning of the pause on any payments being due for federal student loans because of the pandemic. So March 2020 was the beginning of the passage of the CARES Act, it’s been extended several times. We’ve had a freeze on payments, a freeze on interest rates. We now are coming up on class of 2023. We’ll be the fourth graduating class, and depending on what happens here, with the Supreme Court decision, and when the when the payments begin, potentially the fourth class that has not had to make payments on their student loans. I think that is a blessing, and it also presents some challenges. I’d love your perspective as someone who has gone through this journey, what would you have to say to those that are coming out, and those that are recent graduates about, “Hey, be thinking about this when these payments begin, because they will begin at some point.”

[0:11:32] DL: Absolutely. I think if you’re in the position where you are making the money that the average pharmacist makes. I would strongly consider starting to plan now, or starting to make those payments, and loan forgiveness and all of that. Those things are still in legislation. I really don’t recommend waiting for that to happen. It may very well happen. But I feel like if you’re in the six-figure zone, I don’t think the full amount will be forgiven. Even just now, thinking about your strategy, thinking about how you want to approach it, and especially if you’re someone who’s not comfortable with it, you definitely don’t want to just ignore it. There are different strategies that you can take to make sure that you aren’t – it’s completely ignoring it, but you’re still comfortable in your lifestyle. I would really do my research there and begin to plan and have a decision to take some action on that.

[0:12:30] TU: Yes. Such a good time to game plan, right? That timeline to game plan has been extended. We were saying back in 2020, use this window, come up with the plan. I think that’s had a – it’s lost its effect right over time, because it’s been extended so many times. But I love what you’re sharing there, because if payments start back up, and you’ve got a plan, great, you hit the ground running. If payments don’t start back up, but you have a plan, and you’ve just had expenses. That’s great, too, We can allocate that to different parts of the plan. I think my fear is that, especially with rising housing costs, often we have student loan borrowers, that are also first-time homebuyers, like pharmacists making a great income. But at the end of the day, there’s only so much income to go around.

When you’re looking at $200,000 of student loan debt, rising home costs, and obviously inflation. There’s been other competing expenses, I’m sure for many people as well. You start to get pinched in all different directions, and we’ve got a reset. What is that payment going to be when we come out of the pause? Look at the options. Are we doing a 10-year standard repayment? Are we doing an income-driven repayment? Are we doing a loan-forgiveness pathway? What is that monthly amount going to be based on the strategy, and then how do we work that into the budget to make sure that we’re ready?

I do think, though, that for folks that have really optimized this time period, the we have heard of situations of pharmacists that hey, I had a big student loan payment. But because that’s been on pause, I’ve been able to pay off credit card debt or I’ve been able to build up my emergency fund, or focus on another debt that was getting paid off as well. Hopefully, there’s been a lot of wins and opportunities that have come from this

[0:14:05] DL: Yes, I hope so too.

[0:14:07] TU: Let’s talk about how you were able to accomplish this. We can debate whether or not $100,000 is a lot. I think it’s a lot.

[0:14:14] DL: I do too.

[0:14:16] TU: It wasn’t just the amount, but it was the time period and the intensity. Couple years that you paid this off. I’m curious, you know, what sacrifices did you have to make to be able to allocate as much as possible towards the student loans, and then how did you keep up that momentum and the intensity of it knowing that two years, yes, it’s a short period. But when you’re in that type of intense debt repay off, that can feel like a long time. What were the sacrifices and then how did you keep the momentum?

[0:14:47] DL: Sure. I did this with my husband. Total, it was $115,000 together, between the two of us and that did include a car loan. We just included all the debt. We didn’t have credit card debt, but we did have the student loan debt and the car loan. I will be honest, in the beginning, we really didn’t know how long it was going to take us. We just knew we wanted to get more aggressive with our payoff. We use the snowball strategy. Some people don’t know what that is. You just put all your loans in order, you start with the lowest amount, and put them down in order, and you pay the first one off, and then you just roll that payment into the next payment, and you keep going.

The first thing we did, Tim, was we just looked at our budget. If you don’t have a budget, you can create one. I would say, look at the last few months of your banking statements, credit card, all that stuff, put it together, create a budget based off that. Now, the first thing you would do is, you want to see, “Am I spending more than I’m making?” If that’s the case, then you really need to, again, create some type of strategy. That’s what we did. We looked at our budget, we looked at our spending. Even though we did live below our means, I think everybody can identify areas of waste in their budget. For us, that was food.

We would go to the store, buy groceries for the week or so, get tired, go buy food out, because we didn’t want to cook. Meanwhile, those groceries, they’re no longer, you know, you can no longer eat them. They’ve gone bad. So now, we’re throwing away food and buying more food. We really identified that, and that was a big area for us that we could cut down on. So really, looking at your budget, identifying areas of waste. That’s another thing that we did. Then, we just looked at our savings to see what we were comfortable with going at the debt.

I know a popular snowball or the author of Snowball, they recommend the $1,000 for your emergency fund. That wasn’t realistic for us. I live in DC, my husband and I are both from Louisiana. If something happened, $1,000, we couldn’t even get home. We had to make that a larger number, but whatever is comfortable for you.

We did take some of our savings, and we just did the Avalanche Method, which is where you put a large amount of money towards the debt. We use that. During that time, we had just purchased our first home, which was a fixer-upper, pre-foreclosure. In that, the next year, we got a lot of tax benefits, because we did a lot of improvements. When we received that tax return, threw it at the debt, like that’s what we did. So, sometimes things like that happen. Anytime that happens, just throw it at the debt. I recommend being realistic. When I say create your budget, identify areas of waste, going back to the food example. If you’re someone that’s eating out five or six times a week, don’t just say, “Oh, I’m going cold turkey.” It’s not realistic, and you’ll probably be miserable. That’s not the goal, because then you really, probably will quit before you get to the finish line.

What I would recommend is, being realistic with your goals. If you’re eating out five times a week, maybe cut it down to one to two times a week, and also reduce the level of the restaurant. Maybe not the most expensive place, maybe like a mid-range place. You definitely don’t want to deprive yourself. For us, we also like to travel. We decided, okay, instead of maybe taking three to four trips a year, you just do one. That’s what we decided to do, so that reduced a lot of money going out as well.

Setting up some realistic expectations once you do your budget, identifying that waste. Another thing with a budget, some people don’t realize, if you get paid bi-weekly, two times out of the year, you get a third check. For us, that was a mini bonus. What we would do was really strategize with that check. Do I want to spend a portion of that to do something that I’ve kind of cut back on to pay off the debt? To pay off the debt, do I want to put the entire mini bonus toward the debt? Really like looking at different areas that you can strategize in. Another area of waste is subscriptions to the gym, to subscription services, with television or all those things. Just looking at your finances, there may be things coming out every month, $7 here, $10 there. Those things add up.

If you’re not using those things, you can cancel those subscriptions. That’s what I advise, looking at those bank accounts. That’s what we did. Identify as much waste as possible within reason. Then any type of extra money that we received via from tax return, a bonus from your job, or just that extra third check, being strategic about that, and putting it toward the debt. By doing that, we really started to change the way we viewed money during that timeframe, and we got excited about it, and we just really wanted to keep it moving, keep rolling, put more and more money toward it.

During that time, “Tim,” life was still happening. We had unexpected things come up, where we had to pivot, we had to make adjustments. But we never touch the emergency fund, we just adjusted how much we were paying on the debt. We still did it. In two years, we were not expecting that at all. So if you really are serious about it, and you set the foundation, and really make realistic goals, I think you can be successful and also run your own race. Don’t compare too much. It took us two years, but we were only responsible for ourselves financially at the time. That was another thing we knew, “Hey, we’re only responsible for ourselves right now. Let’s take this opportunity, because we don’t know what may change in the future to get this done now.” When your own race, if it takes you longer, that’s fine as long as you’re trying and you’re taking some action on that.

[0:20:48] TU: I love that. So much to unpack there. I think the theme I heard was really a mindset around the intentionality with the financial plan, and several things that you outlined, right? Making sure that you’ve got a budget that is realistic, that one is going to be able to keep the momentum so important. I think we often try to go from 0 to 60 budget. We get frustrated. It further disenfranchises us from the process overall, and it’s something as important as track back 90 days. You said a few months of looking at expenses, before we set these goals that may or may not be realistic. Let’s look at what we have been spending. Sure, we might pivot. You gave the example of eating out. But we want to pivot in a way that, yes, it’s going to free up some cash flow that allows us to achieve the goal. Whether that’s paying down student loan debt, whether it’s paying down other debt, maybe it’s saving for a home, saving for investment property. Whatever the goal is, we got to have cash flow. But just as important, if not maybe more important is the momentum to keep going.

We don’t want a system and a process that’s going to bog us down, it’s going to leave us frustrated. I think making sure that we’re finding that balance of enjoying things along the way, but also, whatever system we’re building, we feel that it’s built in a way that we’re going to be able to sustain it.

[0:22:04] DL: Absolutely.

[0:22:05] TU: I know. I’ve fallen victim too, and I think we see this a lot with people that are getting started, is they develop a beautiful system because they’re really motivated and excited. Then two months later, we’re kind of falling back into the patterns we were, because it’s so much to manage and so much to keep up with. We have a free template for folks that want to get started with the budgeting process, you can go to yourfinancialpharmacist.com/budget. We’ll link to that in the show notes, you can download that.

Then from there, you could use Excel. If you’d like to stay in Excel, you can use a bank tool, you can use mint, you can use – [inaudible 0:22:39] lots of different budgeting tools and options that are out there. Donisha, I want to dig into the we factor more, I heard you say we multiple times throughout the journey. We as in the debt, we as in the plan that we’re developing, we as in making the decisions on what was most important and what goals we’re going to achieve. There’s a lot to get on the same page with and I don’t want to take for granted how hard it can be to have a shared vision where two people are rowing in the same direction. I often have the opportunity to talk with folks, but that may not be the case. You may have one person who’s really engaged, one person who’s not engaged, or one person that grew up in a very different money household than someone else. For different reasons, they’re grown in two different directions.

It’s so hard for them to achieve the goals without first sharing the vision of being on the same page. I sense a very united we front as you were talking. Tell us more about what that looks like, give us the sneak peek into the kitchen table. How have you been able to get on the same page and keep that momentum together?

[0:23:45] DL: Absolutely. I appreciate you for acknowledging that. One thing about us, we’re blessed to go to a church that has a budget class. We took a budget class before we even got married together. That really put us on the same footing. We had the same vision and the same goals of what we wanted to achieve, but the pathways were a little different. In taking that class, we took it together, and we’ve really kind of established that foundation. The budget to me is the first step for everything. Now, once we got married and our finances were together, we really had to look at each other’s strengths. My husband is the big-picture person, I’m the day-to-day person.

When we were doing our debt payoff, I was the one looking at the budget every day and saying, “Okay, we need to slow down in this area because we’re only two weeks into the month and we’re not going to reach our budget goal if we don’t slow down.” That was my job. That’s okay. Then, what we would do is we would have meetings together where I would discuss certain things with him. He’s looking at the bigger picture, and also projecting what’s the next stage after that. That’s kind of his role. I’m the person that goes back, kind of works on the strategy, and looks at the day-to-day and the little details that he really does not want to do at all. We really show one another grace in that and really appreciate our differences, and use those differences for the benefit of the team. That’s how we do it.

[0:25:21] TU: I love that. I think just the awareness to acknowledge the different strengths to articulate that to one another, to embrace the strengths that come with those roles naturally, and then to align those so you can move forward. I love what you’re saying about the budget. I often encourage folks, “Hey, start with the vision and the dream.” Then as you work into the budget, the budget is really the roadmap for how you’re executing your goals. It’s a direct representation of what you are saying collectively is the priority or is not the priority. I think for folks that are listening, and maybe don’t feel like you’re on the same page with a vision, I would really encourage you to start there. Because I think when two people get excited about the vision, before you maybe get bogged down in the weeds of the numbers, like if we can get on the same page about the vision, awesome.

This is what financial success looks like for us as a couple or for us as our family. All right. Now, let’s develop the budget in the system that is the roadmap to achieve those goals. We said these things are most important. Are they represented? If not, why not? What can we change? What should we do differently? I think that that really helps folks get aligned. I think we often think of budgeting as restrictive.

[0:26:35] DL: Absolutely.

[0:26:36] TU: But if we reframe as, “Hey, this is the mechanism in which we’re achieving our goals. I’ll never say it’s exciting, but I think it’s a path in that direction of – and especially if we layer automation on top of that.” Okay. We’re now identifying the goals and automating the goals that we collectively said are most important. Then watch out, right? Because if you have come together on the same page to define the vision, and you’re starting to achieve that, and you both see that happening, things start to move from that forward of what else is possible.

[0:27:08] DL: Absolutely. You hit the nail on the head, especially for us, because the next move was real estate investing for us. That was something that my husband was much more on board with than I was. I’m a pharmacist. We like things to be in a nice little package. It all has to make sense. That was risky to me. I was interested, but I just really didn’t want to dive in. But once we work together to pay that debt off, and I saw the power of the teamwork for us, I just felt like, “Hey, we can do this.” Even if things go beyond what we expected, or things change, and we have to pivot, we have already done that with the loan payoff. So it really strengthened that teamwork, and I was able to get on board with the real estate investing afterward.

[0:28:01] TU: Yes, right. We’ve accomplished this as a team. Obviously, at that point, you’re working from a position of financial strength. We’ve got no debt. We’ve got a fully-funded emergency fund. We’re able to take on a little bit of risk, such that, if things go differently than as planned, it’s not going to create additional stressors. Let’s talk about the real estate. There’s lots of different types of real estate, from passive to active. The guys on the real estate investing podcast that we launched, every Saturday, David and Nate do a great job of talking about the spectrum of real estate, featuring different pharmacists that are investing in all different types.

I think that, at least for me, when I first heard about real estate investing, and really started to dig into learning more. I had a very active image in my mind of, you know, you buy a property, you hold it for the long term, you manage it, you’re fixing things, and a lot of people do that. But there are also more passive strategies, there’s fix and flips, short-term rentals, being in the bank, there’s a lot of different ways to go at it. Knowing the variety of pathways that are out there, tell us more about the pathway that you and your husband decided to go, and how you got to the decision to go down that path.

[0:29:06] DL: The first property that we purchased, it was a pre-foreclosure. It was a situation where it was in the budget that we wanted and the location was good. But the location is really what was most important to us. That’s why I got on board with something that needed renovation, because I realized if you want something that’s turnkey in this neighborhood, it’s far past your budget. I said, “Okay. We’re going to do this, and so we did.” We renovated the home, we didn’t do any structural renovations, but we did – basically got the house. We did that, that went off really well. We stayed in the home for a little while and then we sold it. When we sold it, we sold it before the pandemic when the prices just went crazy. It was before that.

But to see the amount of appreciation in that home, a light bulb went off in my head like, “This is what they’re talking about when they say, real estate can really propel you into financial independence.” From there, the plan was to continue to buy homes, renovate, and then maybe hold them for a little while, depending on what the market was looking like, and then to sell them. That was the plan. But we ended up moving into another home that was a newer build. From there, we have the home that we’re in now, we just renovated this one. We’re kind of still working out the strategy, but the other home is – we’re using it as a long-term rental.

Ideally, we would like to be able to do a flipping business, because we like to do it. But as we’ve done more research, we realize that being able to hold on to some of these properties, and leverage the equity in them, we can propel a lot faster. Our strategy really is to buy, renovate, hold. Then, you know, use that leverage to buy again, which is called the birth strategy. That’s really what we’ve chosen to do. We are open though, toshort-termm rentals. We are exploring other markets for that as well, and really just trying to have a somewhat diversified real estate portfolio. Not to diversify, because I do feel like if you focus on one or two things, you do a lot better. But that’s really our strategy.

We’re okay with doing construction, we’re okay with doing renovation, we’ve done it, and we’re okay. At this point, we’re doing long-distance investing. That’s really our next step.

[0:31:32] TU: I love it. I think it’s a great example of you, take that initial step and kind of get over that initial fear. Then, some things goes plan, some don’t. It opens up some different doors or opportunities. I think for everyone, their journey may be different of what they’re comfortable with in terms of risk tolerance, how active they do or don’t want to be in the process as well.

For folks that are listening to this and hearing some of the strategies that you’re talking about with the birth strategy and leveraging the equity in long-term rentals versus short-term rentals. The Real Estate Podcast, they’ve covered much of that and a future pharmacist stories as well. So we’ll link to that in the show notes. I would encourage folks to check out that podcast as well. I’m curious to know, it sounds like you’re fairly active, right? When you’re talking about the flipping, the construction, is that you and your husband? Is that you managing the project? Are you passive? It sounds like you’re very active. Am I reading that right?

[0:32:23] DL: We are very active. He’s more of the project manager. I’m the money person. I actually analyze the deals, I research areas, and research deals. Then I bring them to him, and we kind of analyze those together. He is the negotiator as well. When the negotiations happen, I walk away, Tim. I’m a lot more polite when it comes to that. I just walk away and let him do his thing. That’s him. He’s definitely the project manager. Working with the contractors and all of that, and I’m more so the person managing the budget, finding the deals, and then we work together on design.

[0:33:02] TU: Okay. Just like your personal finances, it sounds like you have identified strengths, and roles, and areas of responsibility. It’s your own business, within the family unit, which is really cool. I’m curious to know, deal finding. I think that’s one of the biggest barriers for people getting started is where do I look? It feels like people that are in this are just a huge disadvantage of somebody getting started. Are you looking off-market? Are you looking on the MLS? Do you have referral sources? How are you sourcing those opportunities?

[0:33:32] DL: Right now, as you know, these interest rates are very expensive. This market is very unique. But when we started out, we did a lot of driving, just driving ourselves around, and really looking for opportunities where a home may look vacant, or a home looks like it’s not being properly taken care of. Then from there, we will try to see if it was on the MLS. In the case of our first home, it was a pre-foreclosure. It was actually on the MLS as a pre-foreclosure. Then we use a realtor to help us with that.

Now, there are so many just groups of wholesalers and all of this that are out there. If you are trying to get started, there are ways to get in contact with other folks doing that. If you feel like, “Hey, I don’t really want to invest that much money into it” and you want to kind of get that experience and exposure, you can always ask people if you can just link up with them, and ask them what you can add to their system where their pain points are. That’s a great way for you to learn and a great opportunity for you if you’re not really at the point where you really want to invest a lot of money into it.

Right now, we’re currently working with realtors, especially since we’re looking in other markets. So we are working with realtors to try to find some of those properties. We don’t focus too heavily on off-market deals at this point in time. But I do know people do that, and they do that well. There are a lot of systems out there that can help you with that as well.

[0:35:06] TU: When done well, I think real estate can really add to, you mentioned, a pathway to financial independence that could potentially create wealth, lots of reasons to accelerate the financial plan, different tax advantages, et cetera. When not done well, it can be a hindrance on the financial plan, and there is a risk side of it. There’s obviously folks that have built systems and processes that have done this well. There’s individuals that maybe haven’t done as well, or analyzing deals properly, and not looking at the full breadth of what the numbers really are.

I sense that you guys really do have a system, a process. You’re looking at growing and scaling, which tells me the numbers are working. My question is, how do you view real estate investing, impacting and accelerating your personal financial planet. Is it a long-term strategy of building wealth, it’s part of the retirement plan, it’s a tax strategy? Is it short-term that the income from real estate you’re using towards other financial goals? How do you view the intersection of real estate with your financial plan?

[0:36:09] DL: Sure. That’s a good question. We like to kind of be right in the middle with that. What I mean by the middle, is by us holding those properties. They are a part of our long-term plan. But we also like to choose properties where we will cash flow pretty well, also. That’s a good balance there, because we know there are markets where you can really cash flow. But if you go to sell the home and 10 years, it’s going to be the same price you paid for it. You don’t really have a lot of appreciation on that front. That long-term game isn’t necessarily there. We try to find a good balance, and that’s one of the reasons we’re leaning towards short-term or midterm rentals. Because right now, in this market, especially, that’s really going to give us that that cash flow, but we can also have that appreciation.

We do have a long-term rental, and thankfully, it’s in a location where we’re doing very well on both fronts. But trying to get there right now in this market can be challenging. We’re looking towards that short-term, midterm. But we really like to have a balance, because we do want to use the real estate. Right now, we’re just using the money to purchase other real estate, not for our personal use. But we do want to get to a point where, “Hey, we could if we wanted to.” It depends heavily on our real estate income, and maybe transition into a lower workload on our W-2s or something to that effect. But we are in this for the long run, so we’re not trying to accumulate all of these rentals and get rich quick. That’s not really our strategy.

[0:37:45] TU: Yes. You’re not having to replace your W-2 income. I think that’s an interesting point, because for many individuals, there’s the initial strategy of, “How do I do this well, and then how do I scale the system, so I can invest more into other properties, more opportunities?” But then, there becomes a point of the portfolio where, depending on what else is going on, your retirement plan, et cetera, you might want to draw from that asset. There’s a strategy involved in that, and the tax optimization and so forth there as well.\

As we wrap up, I’m curious to hear your perspective. You’re on the other side of paying off your student loans, you’ve been out for over 10 years, you’ve got a good base in real estate investing. For all intents and purposes, you built a really strong financial foundation that you and your husband are going to grow upon for the next several decades and beyond. For individuals that were – just for you and I were a little over a decade ago, I think there’s both excitement and feelings of maybe some level of overwhelmed. Hearing a story of, you’ve been through that, you’re beginning to build wealth, you’re investing in real estate. What advice would you have for those individuals that are on the front end of this journey may be feeling overwhelmed, frustrated, confused with where they’re at with their finances?

[0:38:58] DL: Absolutely. That’s a great question. I would say, write down what’s important to you and your why. So really, write down what’s important to me, my values, and you can even project that out over the next 10 years, what do I want my life to look like? I think if you start with that, then you work backwards, and you look at what you’re facing right now. Then, you leverage the tools and all these podcasts like this one that are out there, and all the different strategies that you can take to reach your goals. If you do have a lot of student loan debt, and that debt is going to impede you from getting to those goals, then maybe that’s where you start. If you don’t have student loan debt, or it’s not a significant amount of student loan debt, but you do know in 10 years, you do want to have the option of working a W-2.

Then you may want to start with looking at different ways that you can invest your money, so you can make it work for you and make it accumulate even faster. That’s what I would do. I would kind of project out maybe 10 years. Because let’s be honest, a lot of new pharmacists are in roles, and they’re thinking, I don’t want to do this for 10 years, and that’s fair. Trust me, we understand. If that’s where you are, then definitely, think about where do you want to be, and what your goals are, and then work backwards. Look at what’s in front of you, and decide what the, what the priority is, and then start to educate yourself on different methods and strategies that you can use and get help. Get help, there’s no problem asking questions, meeting with a financial planner that understands your goals, and is willing to work with you to achieve your goal. That’s what I would recommend to someone who’s at the front end of this journey.

[0:40:49] TU: I love that. Great words of wisdom, and I’m so grateful for you coming on the show to share your journey. Congratulations on the debt-free journey. I have a sense you’re just getting warmed up here into the future. I appreciate you sharing that with our listeners, and I look forward to following your journey as well.

[0:41:05] DL: Thank you. Thank you so much for having me. I’ve enjoyed it and we will definitely keep you posted on the journey. I appreciate you and this platform.

[0:41:12] TU: Thank you so much.

[0:41:13] DL: Thank you.

[END OF INTERVIEW]

[0:41:14] 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 in the podcast and corresponding material 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 post, and podcast 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 publish. 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 282: The Top 10 Mistakes First-Time Homebuyers Make

Posted on by Caitlin Boyle

Nate Hedrick, The Real Estate RPh and co-host of the YFP Real Estate Investing Podcast discusses the top ten mistakes first time homebuyers make.

Episode Summary

On this episode of the Your Financial Pharmacist podcast, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, welcomes Nate Hedrick, The Real Estate RPh, back to the show to discuss the top 10 mistakes that first-time home buyers commonly make and how you can avoid them. In their discussion, Nate shares a brief market update since his last appearance and details how market changes have impacted him as a real estate investor looking for new opportunities in the current environment. Next, Tim and Nate go through the top 10 mistakes first-time home buyers make in a rapid-fire style, elaborating on each of the common themes plus some insight on how to avoid them when shopping for your first home.

The Top 10 Mistakes include:

Letting the Bank Set the Budget
Rushing In
Comparing Your Rent Payment to Your Mortgage Payment
Assuming You Need 20% Down
Skipping the Pre-approval
Waiving a Home Inspection
Overlooking the Big-ticket Items
Making a Large Purchase Before Closing
Forgetting to Lock in Your Interest Rate
Skipping Out on the Proper Team

Listeners will learn how best to position themselves for their first home purchase and the critical role a real estate agent plays in the process.

Links Mentioned in Today’s Episode

Episode Transcript

[INTRO]

[00:00:00] 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 had the chance to welcome back a friend of the show, Nate Hedrick, the Real Estate RPH, and cohost of the YFP Real Estate Investing Podcast. On today’s episode, we talk about top 10 mistakes that first-time homebuyers make.

Now, we know that buying a home or investment property is certainly an exciting experience, but also can feel overwhelming at times. Between finding an agent, securing your financing, and actually searching for a property, it’s hard to know where to get started. That’s why we’ve teamed up with my guest today, Nate Hedrick, the Real Estate RPH, to provide a simple solution to jumpstart your home buying process. Through this concierge service, Nate will help you craft a plan, connect with a local agent you trust, and stay by your side throughout the process to lend an ear or helping hand.

You can learn more about the free concierge service with Nate and book a call by visiting yourfinancialpharmacist.com. Click on home buying at the top and then find an agent. Again, yourfinancialpharmacist.com. Click on home buying and then find an agent. Okay, let’s jump on an interview with Nate Hedrick, the Real Estate RPH.

[INTERVIEW]

[00:01:15] TU: Nate, welcome back to the show.

[00:01:16] NH: Hey, Tim. Always great to be here.

[00:01:18] TU: Glad to have you back. It’s been a while. Episode 268, we had you on the show. At the time, we talked about how interest rates, inflation, and market insanity are impacting homebuyers. Here we are, just a couple weeks later. Interest rates have gone up even more since that point, and I want to get a pulse from you on what you’re seeing out there in the market, before we talk about some of the common mistakes that we see with our first-time homebuyers.

[00:01:43] NH: Yeah. Obviously, the interest rate increases have been significant since we last talked, and it’s affecting the market in different ways. Again, I’m only one piece of the broader country that is the market because it’s different everywhere. But in my neck of the woods, in both my personal investing and with my clients that are buying homes or investing in homes, is that the interest rates are hurting, right? It’s really raising that monthly payment. So it’s affecting people’s budget. It’s affecting their ability to purchase, in some cases.

I’ve had investors completely back out of deals because a couple months down the road now, it’s – Nothing makes sense any longer in terms of the buying price. So it’s making some waves there. On the flip side, though, demand is still high because there aren’t a lot of sellers that are ready to release their properties. Just like we talked about previously, if you’re locked in right now at three or three and a half percent, what’s the use in selling, just to go grab seven percent somewhere else if you don’t have to? Absolutely. So it’s an interesting time right now. It’s still getting – It’s still crazy, and I don’t think it’s going away anytime soon.

[00:02:43] TU: I keep coming back to that, as we talked about in a previous episode. But it’s such a good point. If somebody’s locked in high twos, low threes, when we saw the rates really dip, unless there’s a real urgency to move, new job, whatever might be the situation, like who wants to trade a three percent rate for a high six in the time right now? Yeah.

It’s crazy. When you just look at monthly payment, which, of course, many folks are thinking about their monthly budget and how the home purchase fits into the rest of their expenses. But, man, what you can get today from a monthly payment versus what you could get 12 months ago is wild. I mean, just wild to see the differences. So I’d be curious to see what happens with rates longer term.

I’m curious, from your perspective as an investor, considering you’re the cohost of the YFP Real Estate Investing Podcast, like how has the market, environment conditions, interest rates, how has that changed your perspective and outlook as an investor looking for opportunities?

[00:03:43] NH: Yeah. It hasn’t changed the fact that I’m looking, right? I’m always looking to purchase. It’s just changing how we’re running the deal analysis, right? I just had a property come out. I kind of have to relearn the market. We just had one come up this week that kind of hit those numbers, right? Where we know the markets that we look in so well, that when a property pops up and it’s in a certain price range, like I immediately would know, “Oh, this is a deal. We need to go look at it,” right?

Well, this one that just popped up hit those warning bells. But then when we actually did the deal analysis, it’s no longer a deal. So I have to really reset my numbers, which is tricky, just because the interest rate is hurting cash flow so much. So if we are making those purchases, they have to be a really, really good deal for it to work.

[00:04:24] TU: Yeah. I think you know better than I. You’re much more active in the space than I am. But it feels like a time period like this, where you start to really whittle down maybe the investor pool that’s out there actively looking. It really feels like it incentivizes those investors that have a sound system and process in place and have been doing this for a while. Not only on a deal analysis, but also how can you efficiently manage a group of properties and how can you optimize the portfolio that you have.

I think for those like you and David that have done the hard work over several years to develop those systems, not to say deals are readily available, but that I think it incentivizes those that have a good foundation and a good system in place.

[00:05:04] NH: Yeah. They’re still out there. It just takes, like you said, some creativity, some diligence, and making sure you adjust.

[00:05:11] TU: I love that, though. I’m always looking, right? I’m always looking.

[00:05:14] NH: Absolutely.

[00:05:15] TU: All right. So this week’s episode, we’re going to cover the top 10 mistakes that we see first-time homebuyers making. Nate, to be clear, there is no judgment here, as you and I, I think, have probably made all of these mistakes maybe between the two of us. So we’re hopeful through our experiences. Being both first-time and second-time homebuyers, we’re hopeful that we can share some of this information, what we’ve seen also with other pharmacists, to help prevent others from maybe making some of these same mistakes. We’re going to run through these in somewhat of a rapid fire format. I’m going to present the mistakes 1 through 10, and then we’ll talk about each one in more detail.

Nate, number one is something we’ve talked about often when it comes to first-time homebuyers, and that is the number one mistake is letting the bank set the budget. Tell us more about what you mean here.

[00:06:02] NH: Yeah. I think what we see from first-time homebuyers, especially, is the thought that, “Well, I’m going to go to the bank. I’m going to get pre-approved. I’m going to ask them what I can afford.” The bank looks at your finances and says, “You can afford up to a $500,000 house. This is your budget,” when in reality, the way we should be approaching it is to determine our budget way in advance, separately together, whatever that looks like, without the bank even involved. Then you can go to that lender and say, “I’m looking to purchase up to $350,000 home. Help me get financing for that,” and really trying to approach it from that budget first perspective, rather than letting the bank determine it for you.

[00:06:39] TU: Yeah. We’ve talked about this before, home buying, important piece of the financial plan. It’s one part of the financial plan, right? There’s a lot of competing priorities for your monthly budget. I think that you and I have been talking about this now for years, but this is maybe even more true than it has been in years gone by. When we consider the impact of inflation on the monthly budget, the average student loan debt continues to creep up in a direction where a greater percentage of one’s monthly income might be accounted for when it comes to student loans or other debt.

Oh, and by the way, like pharmacists’ income, even if we see some growth there, like they’re not accounting for what we’re seeing the rise when it comes to not only inflation, but also the rise in the housing market, as we were just talking a few moments ago. So all the more reason that we really need to be setting the budget when it comes to purchasing the home before the bank sets that budget for us to make sure that it fits in with other priorities, and that we’re able to accelerate those other goals in the financial plan, and that we don’t find ourselves locked into a 30-year timeline of something that we look up and say, “Hey, wait a minute. We don’t have a whole lot of cash flow to do other things.”

Number one mistake, letting the bank set the budget. Number two is rushing into the purchase, right? Easier said than done. Nate, tell us more.

[00:07:54] NH: Yeah. What I’m seeing right now, especially in the last six months or so, is individuals who have this this FOMO, the fear of missing out. The interest rates are rising. The market is crazy. I have to bid fast. But take a step back. Take some perspective. Realize that, again, if we look at the huge timescale that is mortgage interest rates over time and the market in general, we’re still not at a point where the interest rate is exorbitantly high compared to history. We’re still not at a point where there aren’t going to be homes on the market soon.

They’re not going away, right? So don’t rush into this decision. It’s a huge purchase. So you want to make sure you’re doing your work upfront. You’re setting that budget, like we just talked about. You’re choosing a location that you actually want to be in, right? You don’t want to make that decision and then want to change it later. You’re looking at what’s important to you. Again, what I’m seeing and what I’m hearing from others in the marketplace is they’re making decisions. Then six months later, they’re regretting it because it’s not exactly what they wanted. They just felt like they had to buy now. So don’t rush in.

[00:08:52] TU: Yeah. I think there’s always a feeling of pressure around that home purchase, right? You and I felt that even in the market. That is not the market that we’re seeing today, right? I just remember that feeling of like, “Okay, I graduated. I did residency. I got married. We’re thinking about starting a family.” It just feels like that box. Like you got to go check it off and buy a home. As we’ll talk about here in a moment, like, “Hey, I don’t really want to pay rent anymore.”

I think that pressure is always there for first-time homebuyers. But in this current environment, it’s on fire even more. I think there’s this feeling of like, “Oh, man. The Fed’s going to raise the rates like even more. It’s going to go up. Everyone else is kind of rushing into this period of competition. I better jump on this.” Certainly, if the deal, location, and everything lines up, there’s a case, obviously, to move forward. But there’s very few things that we’re locking ourselves into for 30 years, and we want to be careful to make sure that, again, fits in the budget. We talked about that in point number one, but also that it fits in with our plans, and that we’re not 6, 12 months in and saying, “Man, maybe I should have waited a little bit longer,” or, “I regret this purchase at the time.”

Number three is comparing your rent payment to your mortgage payment. Guilty as charged. I remember when we bought our first home, Nate, back in 2000 – I think it’s been 2009. We were paying $1,100 a month for rent, and it’s even hard to say that out loud in 2022, three-bedroom condo. I think it was like 1,500 or 1,800 square feet. I remember looking at a mortgage payment, our first home we purchased for $176,000. Again, hard to believe in 2022, and I remember seeing, “Wait a minute, $1,100 rent. Principal and interest is going to be about $1,100. Why would I not purchase a home?”

So talk to us about why comparing rent payment and mortgage payment can potentially be a mistake and not considering all the costs involved?

[00:10:45] NH: Yeah. I think this is something I, again, totally agree. I did the exact same thing when we bought our first home, right? You’re looking at that price, and you’re saying, “Well, it’s a monthly payment that makes me live here, versus a monthly payment makes me live here. I got to compare those.” But with buying a home, there are these other costs, right? You’ve got property taxes, which is huge. You’ve got insurance, which you might not have any insurance, or you might just have renter’s insurance on your current rented property.

It’s not just that upfront balance. There are a lot of these hidden costs that go into purchasing a home, even something as simple as maintenance and repairs, right? Today, you probably have a landlord or a management company that you call if something breaks. But when you buy that house, you’re in charge, right? You’re calling a plumber. You’re calling an electrician. You’re calling a HVAC specialist. So you have to expect those costs and be ready for them.

[00:11:31] TU: Yeah. Depending on the area that you live in, property taxes, it feels like there’s, obviously, a significant creep that can happen in there. But that can be a big part, the monthly payments. I think about our property taxes here in Columbus. We’re looking at about $500 per month, which I know in some parts of the country might be higher. Some might be a little bit lower. But when you look at that as a percentage, compared to your mortgage payment, like for us, it’s a pretty big chunk that’s going to our property taxes. Then you add on top of that insurance. You mentioned potentially HOA fees, depending on the area that you live in, maintenance and upkeep.

Especially for first-time homebuyers, like you don’t have a garage full of lawn equipment and other things. You might want to do landscaping. You might want to do some remodeling, furniture you’re going to need for the home. So making sure that we’re factoring all these things in. I’ll link too in the show notes that the New York Times has a really cool calculator that looks at the rent versus buy, and it really tries to put it as apples to apples as you possibly can. So factor in a lot of the costs that Nate’s talking about here and making sure that we’re looking at the big picture, as we look at what the impact of that will be on the monthly budget. That’s number three, potentially making the mistake of comparing your rent payment, your mortgage payment.

Number four, Nate, is assuming you have to have 20% down. So this really gets into the types of loan options that are out there and how we need to be thinking about saving for that down payment. Tell us more.

[00:12:59] NH: Yeah. I often see this when somebody talks to somebody who bought a house somewhere else, right? Or 10 years ago. I talked to my folks, and they said, “This is how I bought a house,” and they get this advice that, well, you got to have 20% down, and then you can move forward. Some people can feel really stuck with that, especially in these higher cost of living areas, where 20% down could be $200,000, right? So what we’re advocating for is not – Don’t skip 20% down. That’s not a bad place to be but evaluate it. Look to see what your other options are.

We’ve got pharmacist home loan options that are three and a half percent down. We’ve got FHA lending. That’s the same rate. There’s a lot of different options out there that aren’t just 20%, and there are advantages and disadvantages to each of those. So weigh those options, look at them, talk with somebody who knows what they’re talking about, a mortgage lender, preferably, and figure out what the best option is going to be for you.

[00:13:48] TU: Yeah. Nate, I’m curious. Is your opinion on this changing at all, as interest rates creep, right? So when you and I talked about this a year, a year and a half ago, if we’re just thinking about from an opportunity cost standpoint, obviously, there’s a risk in if we have nothing down or too little down, market changes. You would potentially be upside down on the mortgage. We need to be considering that, our comfort with risk. How else that fits into the rest of the plan.

But purely from an opportunity cost standpoint, when you’re talking about a loan at 3% or 2.8, 2.9%, you could make a reasonable argument that like, “Hey, if I can put as little down as possible and finance that out over 30 years, I could potentially use those dollars elsewhere in the financial plan in a more strategic way.” As we look at high sixes, is your opinion on that changing at all?

[00:14:38] NH: It’s always been that you want to create a safety net, right? Like David and I talk about on the podcast all the time, we are safety-oriented, boring pharmacists, and that’s not a bad place to be, right? Where you want to go into this with the idea that if the market does correct and I have to sell because that’s when it’s a problem, when you have to sell. Or am I going to be okay? So if you’ve got 10 percent down in a property and there’s an 8% correction, you’re in a good space.

But if you’re talking about maybe a bigger correction or a lower percentage down, it can be a little more risky, right? There’s no way to know exactly what the future holds, so just it can be beneficial to at least consider that 20% down, just because of the safety net that it provides.

[00:15:20] TU: Yeah, yeah. Good point about the future, right? We might find ourselves with a huge refinance market in a year or two if rates were to come back down, so good thing to be thinking about. Can’t bank on it but certainly might be an option in the future. The other thing I think of here, Nate, with a 20% down, you’ve talked before on the podcast, you also wrote a blog post about this, we’ll link to it in the show notes, is that student loans is often a common barrier to being able to save up 20% down, right?

You think about even here in pretty affordable Ohio, if you’re looking at buying a three to four-bedroom home, 2,000, 2,500 square feet, depending where you’re living, probably pushing now 400,000 to 500,000 dollars on that home. So traditional 20% down, we need 80,000 to 100,000 dollars. Trying to accrue that as a first-time homebuyer, while making student loan payments, which we haven’t been doing now for over two years, but those are going to start back up, that can be very overwhelming. So I think that consideration of how do I balance a student loan repayment with the home buying, and that’s an opportunity where maybe you don’t need 20% down. Maybe you decide to do 20% because you feel comfortable with that. But we’ll link to that article in the show notes, as I think that’s probably a topic of interest among many listeners. So that’s number four, assuming you have to 20% down.

Number five mistake is skipping the pre-approval. Tell us more here.

[00:16:40] NH: Yeah. One of the things that I’ve seen other buyers and I always advise my clients is to get that pre-approval process done early. That’s going to the lender and making sure that you are going to be able to get a loan from them. What you really want to check with them is, one, are there things that I was not aware of, right? Maybe the budget that I said is not realistic, and the bank is going to tell me otherwise or perhaps that the rates are higher than I was expecting, and my calculations are off. That data check is really important from a perspective of which houses can I look at.

But then more importantly is once you do find the house that you like, everybody’s requiring you to have that pre-approval letter with your offer. So if you find a place, and let’s say there’s competing offers, or you need to move quickly on it, and it’s a Friday afternoon, you don’t have that pre-approval letter in place, you might not be able to purchase that home, just because your offer is no longer a competitive one. Doing that upfront, doing that early is never going to hurt you. You can always renew those pre-approval letters 90 days later or 180 days later. Do it upfront. Make sure that you’ve got that pre-approval letter in place. It’ll just protect you when you’re going to look at those homes.

[00:17:45] TU: Yeah. I think that’s really good advice, Nate, because it’s one of those things I remember when we were looking for homes. My thought was like I’m just casually looking exactly on realtor.com or Redfin or Zillow or whatever. That often quickly turns into like, “I’m seeing a property, and I want to make an offer.” So I think we got to be realistic about where are we at in the process of readiness to buy home. Then as you mentioned, you can renew those, but having that ready if there’s a potential that we’re going to be moving forward with an offer.

All right, number six is waiving a home inspection. Nate, that gives me anxiety, even hearing that. So tell me more about what you’re seeing here.

[00:18:22] NH: Yeah. So especially the last year or so and even going back a little further, we saw a lot of the craziness in the market leading to people saying, “Well, how else can I be competitive, right? What else can I do? I can’t offer more money. So maybe I’ll waive the inspections, and I’ll just get the house and kind of roll the dice that way.” so I’m always an advocate that you need to have that expert in there to take a look at home, especially if you’re a first-time homebuyer, right? You don’t know what you’re looking for. Your agent can be helpful in this, but they are not an expert in home maintenance. They’re just not.

We’re experts in the process. We’re experts in the communication. We’re experts in the forms that you need to fill out and how to navigate the actual buying process. But we are not contractors, right? I don’t know how to look at a roof and say, “Oh, yeah. That’s a 15-year roof or a 30-year roof,” right? We just – That’s not part of our process. So making sure that you’ve got an expert on your team that specializes in that area is absolutely essential, and that last line of defense is that home inspection. So make sure you’ve got one in place.

[00:19:20] TU: Yeah. Not all inspectors are created equal, right? Just like not all agents or financial planners or accountants are created equal. So we’ll talk in a little bit about having a team, but this is why I think it’s so important that you’ve talked about this before. If you start with a really good reputable real estate agent, they often are going to be able to point you to a reputable inspector, right? You want to make sure if you’re spending whatever, 400, 500, 600 dollars on an inspection that you’re going to feel good about the quality of that inspection.

I’ve been through the process of because of the results of an inspection pulling out of a purchase of a property, and like it’s significant. If it’s something that maybe comes up that’s going to cost you 500 bucks, 1,000, 2,000 bucks, like you can roll with that. But it’s the big structural foundational types of things that, man, you just don’t want to be surprised. I think we got to know our role as pharmacists, right? I can’t walk into a home. Maybe you’re [inaudible 00:20:12], but I can’t walk into a home and be like, “Oh, yeah. This is really going to be a problem,” or, “This is not.”

I’m more enamored in the moment about like what does this look like for our family living in this home, right? I think that tends to even gloss over sometimes what can be some of the bigger pieces that come up.

[00:20:29] NH: Even with my experience and David’s experience, I mean, when I’m working with a client as their agent, I still don’t want to be the only expert they’re getting advice from, right? I can look at something and say, “Yeah, that’s probably going to be a problem.” But the extent of that problem, I don’t want to be the one to speak to that. You need an expert, right? So it’s super important to clarify that and just make sure that even if you’ve got a really, really good agent on your team, that inspection is still a super important piece.

[00:20:54] TU: So that’s number six, waving a home inspection. Number seven is related but different, and that’s overlooking the big ticket items. Again, I think often when we’re looking at a home, we get excited about maybe some of the fixtures, the furnishings, the remodeled kitchen, those types of things. But are we thinking about the major expenses that might be coming in the future, even if it’s not something in the moment that they’re going to be coming down the road? Are we ready for it from saving standpoint as well? So tell us more here what you’re thinking about.

[00:21:23] NH: Yeah. Just I wanted to put this in people’s heads because it’s something that I often have to coach my buyers through of, hey, the inspection report says this is perfect, and it’s working today. But take a look at the fact that it’s deteriorating, and that it’s going to be replaced in five years, right? Your furnace is working, and everything looks great, and the house is warm. But it’s 22 years old, and we’re about to be done with it, right? So those are things that even with an inspection you might not necessarily catch.

The other one I saw just recently was a house that was – It was painted wood siding, and it looked flawless. It looked great. It was probably done in the last two years, and just, again, look fantastic. But that’s something that’s going to have to be maintained, right? You have to paint that every five, six, seven years. So a buyer might go into that and think, “This is great. It’s painted siding. I’m done.” But that’s a huge expense that’s going to be coming down the road. So what I advise buyers to do is to look at some of those big ticket items, even if they’re not problems today, and sort of budget for them for the future because they can become problems quite quickly.

[00:22:22] TU: Yeah. Some of them you don’t necessarily think about, even on the second or third home purchase. So I think for first-time homebuyers it makes sense. But things like the roof maybe are some common ones. But driveway, so like we have asphalt driveways. It’s getting beat up right now, and we got a quote for what would that take to eventually repair, put in a cement driveway. Holy cow, right? That’s really expensive. Or what’s the potential lifespan of your AC unit, your hot water tanks? How new or not are those? Other types of upkeep, you gave the example of kind of painting the wood. So there’s a lot of things that could come up.

Just to nerd out here for a moment from the financial plan perspective, this is where having a bucket of funds that you’re planning each month for these expenses that we know are going to come up, we want to be planning for it, right? So we talk a lot with the planning team about creating buckets of savings. If I need a roof, and it’s expected to kind of be at the point of replacement in five years, that’s not an emergency when it gets to that point, right? So what can we be doing to both plan and project those, and then create the buckets of savings, so we can accrue those funds over time and to be ready to pay for those when they come to be?

I think those are great examples, Nate, of things that we’re often overlooking when we do like the rent versus buy comparison.

[00:23:41] NH: 100%. Yeah.

[00:23:42] TU: Those big – Especially if you convert them into like a monthly payment of what it would take to save those and then tack that on to what we may be paying in terms of rent.

[00:23:50] NH: Something that people often rely on here is a home warranty, which is not a bad idea, right? You can use a home warranty at purchase to help combat some of those high cost items, maybe fixing a furnace that breaks down or repairing an AC unit, whatever. But don’t rely on that only, right? A lot of those home warranties – I’ll give you another example from recent past, home warranty for a roof. Great. It seems like, okay, if the roof is going to break, when it does, I’ve got this home warranty in place.

Well, what happens a lot of times is that home warranty company looks at when you purchase that warranty. Let’s say you purchase it at year 15 on a 20-year roof. We’re only going to cover that quarter of that roof that you’ve actually kind of paid for at the time that you bought it. So keep in mind, home warranty can be helpful in terms of defraying some of those costs, but it is not a solve all the problems kind of a thing.

[00:24:39] TU: Yep. Great point. So that’s number seven, overlooking the big ticket items. Number eight common mistake among first-time homebuyers is making a large purchase before closing. So I assume we’re referencing some impacts here on credit and lending. Tell us more.

[00:24:54] NH: Yeah. When you were going through the pre-approval process, the bank is looking at all of your debt and all of your income and all of your assets. If you are adding things to the debt side of that equation before closing, when they go to recheck things, you can actually price yourself out of things. You could mess up your interest rate. You could mess up actually getting the property. I’ve seen people where they go and they buy furniture before closing. This has never happened to me but to others I’ve heard about, where they go to those great 36 months, same as cash. I’m going to buy all the new furniture I need for this new house before closing.

When you buy something like that on credit at a furniture store, for example, it’s looked at like a maxed out debt. So if I buy $5,000 of the furniture, 36 months, same as cash, they are taking out a $5,000 line of credit, and I have maxed out that line of credit.

[00:25:40] TU: Oh, utilization of it. Yeah.

[00:25:42] NH: Exactly. So when the bank goes to rerun your report on this great home that you’re about to purchase, they all of a sudden see that, whoa, you got this credit hit. Now, your credit score has dropped. Your new interest rate is now a point higher because you’ve messed this up. So don’t make any major purchases. Don’t take out credit cards. All that stuff should be just put on hold until after closing.

[00:26:02] TU: Yeah. A point higher over 30 years is going to be a lot more than $5,000. That’s a really good one. So really making sure that as you get to that point of closing, as you’re working through the process with the bank, making sure any purchases, any opening up credit card you need to put on hold or making sure you got some space in separation in that as well.

[00:26:25] NH: Or at the very least, talk to your lender first. Hey, lender, I know we’re going through this, but I’m thinking about doing this. Is that going to be okay? Is that a bad idea? Ask them. Keep them engaged. Do not surprise your lender. That’s the worst thing you can do.

[00:26:38] TU: Okay, number nine is forgetting to lock in your interest rate. I know another common question that comes up here is when people are comparing rates, especially if they’re searching these on a website, is the option of purchasing points as well. So tell us about rate locks and then how one should be thinking about the purchasing of points and what that means.

[00:26:59] NH: Yeah. So the rate lock point was actually something that I just added kind of for this time, right? Because previously, locking your interest rate wasn’t nearly as important. Interest rates weren’t going anywhere. So if it was 3.5 this week or 3.3 next week, I mean, whatever, right? It’s not that big of a deal. Locking it was great, but it was not as important.

Now, with the way that rates have been increasing recently, what we’re seeing a lot of lenders offer is a locked rate, where you can lock it for 45 days or even sometimes longer with a float down option so that if the rate does drop, you’re allowed to drop along with it. But if you don’t lock in that rate, your rate can increase with the market.

So I actually saw – I had a buyer recently that closed on a property, and we almost missed the date for his rate lock. Luckily, the lender was able to extend it and make sure that we met with closing. But if you don’t lock that rate at the right time or don’t close on time, you can miss that window and easily see half a point or a point increase as that month and a half goes by that it takes to close on a property. So it can be a big deal.

[00:28:01] TU: Tell us about the option of purchasing points. I know this comes up a lot, where kind of the window rate that someone will get may include or be assuming that you’re going to be buying points, essentially buying down that interest rate. So what are you seeing out there right now in terms of the viability of that and how people can think about the breakeven point where that makes sense?

[00:28:23] NH: Yeah. Another question that’s changed dramatically in the last two years since I last talked. But the idea with a point is that you can essentially pay money up front to have a lower interest rate over time, right? You can decrease your interest rate by paying for it in the form of what’s called points. You can even, in some cases, have the seller pay the points at closing. That’s pretty uncommon still in this market, but it’s out there.

Typically, again, in the past, I was not recommending buying down points because the rates were already so low that why spend cash up front, just to get from 3 to 2.9, right? Who cares. But now, if you can get significant movement on that interest rate and you’re looking at a very, very large loan, it might be worthwhile to consider, especially if you’ve got a little extra capital upfront today and want to lock in that lower interest rate over a longer period of time.

It’s something to consider. It’s always worth looking at. The best way to do it and compare things apples to apples is to ask every lender that you’re shopping with for a rate that is without points. Give me the flat rate without points. Let me see that first, and then let’s talk about adding points onto it. Because that’s the only way you’re going to be able to compare it apples to apples.

[00:29:26] TU: Yeah. That might not even be so obvious when you’re initially shopping. I was talking with a pharmacist recently that was talking about a rate they had received from a lender, and they didn’t realize that there was built into that an assumption they were going to pay X dollars to buy down the rate. But they were comparing that to another rate that didn’t have points involved. So to your point, we really need to compare those as equal as possible to be able to make a decision on where to go forward. That’s great.

Number 10, Nate, is skipping out on the proper team. I talked about this a little bit with making sure you’ve got a good agent that can be a connection and referral to other parts on the team. But there are a ton of folks involved in this process, right? When you think about the agent, you think about the lender, you think about the title company, the lawyers that are working as a part of the title process. Tell us a little bit about what is the proper team and some strategies folks can employ to make sure they’ve got the right team in place.

[00:30:16] NH: Yeah. This part can feel overwhelming. Whenever somebody started talking about team, I started to feel like, “Oh, I don’t know how to make a team. I’m a first-time homebuyer. I don’t know what I’m talking about. I don’t know who to call. That’s too overwhelming. I’m not going to deal with it,” right? But I encourage you to look at that and not think of it as something scary, but it’s something that’s there to help you, right? Just like we have a team in the hospital or a team in the pharmacy, we’re not expected to know and do everything exactly, right? It’s a team effort.

Starting with someone like a real estate agent can be a great place to go. You can find one expert. Then from that expert, they can refer you to others that are in that space, so your accountant, your insurance agent, your lawyer, your home inspector, your contractors. All those can stem from that real estate agent if you’d like. But you want to make sure those experts are in place because, again, relying on you to do all the background research and googling things ahead of time and YouTube videos online, right? Like you want to make sure that you’ve got experts in place that can help you with those difficult things so that you’re not trying to manage all of it, while also having a career and a family and everything else that’s going on.

[00:31:18] TU: I really like how you’ve simplified this because the concept of all those individual members is overwhelming. But if I can feel good about finding a good agent who is qualified, reputable, I feel good about the working relationship with that individual, good communication skills. From there, I can really rely on them and trust them to help me with those other connections and other parts of the team.

Just like we talk about with financial planning, the bar of entry into financial planning is fairly low in terms of someone being able to call themselves a financial advisor. Therefore, there’s a huge span that’s out there in terms of experience, credential, certifications, individuals that they’ve worked with and areas of expertise. I would argue there’s a lot of similarities in terms of real estate agent, in terms of how many deals they’ve done, experience they have in working with pharmacists or working with certain lending options and their awareness of lending options that are out there. So I think really doing due diligence and homework to make sure you have that good agent is really important.

That’s one of the main reasons, Nate, that we’ve now collaborated probably going on, what, three-plus years working with you to develop the home buying concierge service, which is really intended to help individuals in the YFP community, looking to purchase a home, whether it’s their first home or a second home, whether it’s a real estate investment property to make sure they find an agent that they are comfortable with, that’s a good fit, but also that has you there as a resource along the way. So tell us a little bit more about that home buying concierge service, and then we’ll make sure to point folks in the right direction to learn more information.

[00:32:53] NH: Yeah. What we wanted to develop was a way to take the guesswork out of that first step. Like I said, when I was buying my home, first-time home purchase, I was overwhelmed by this idea of the team and like where do I start. I think I just like asked a couple of friends for a real estate agent. That can work, right? It’s good to get a referral from someone personal. But what we’re finding is that a lot of times, people are moving somewhere, or they’re in an area where maybe they don’t know a good agent, or maybe that friend didn’t have the best experience.

So if you’re looking to take that guesswork out of the process, what we’ve developed is a really simple phone call. You can connect with me 20 or 30 minutes on the phone. We’ll get an idea of your budget, where you’re looking to buy, what your must haves are, what type of agent we think you’d work best with. We have some really cool targeted questions about what that process looks like and what’s important to you when picking an agent. Then we help you get connected with them, all for free. So we’ll actually interview agents in your local area, if we don’t have anybody already in our Rolodex of people, and we’ll get you connected with them so that you can get off and running on the right foot. Like we said, If you don’t know anything else about the area or any other people to work with, start with that agent, and everything can kind of grow from there.

The last piece that I think is important is that once we make that connection to the agent, we don’t go away like, “I don’t drop off the team. I’m still part of that process.” So if you need a second opinion on something, if you want to bounce ideas off of somebody who’s both a pharmacist and an agent, come right back. I’m still part of the team that can help you guys out. So it’s been a fun service because I get to see pharmacists buy places all over the country and see them grow. It’s a great way for us to kind of give back and help out with a pretty stressful process and making it less stressful.

[00:34:30] TU: Yeah. Again, whether you’re a first-time homebuyer or you’re moving or you’re looking for an investment property, all of those involve finding a good agent, and that service that Nate just described is intended to do exactly that, regardless of if it’s a primary home or an investment property. We’ve had some really cool success stories through this program, and I would point folks to episode 160 as an example of that, where you talked with Shelby Bennett and Bryce Platt about their experiences, working with you through that concierge service and what that is experience was like and why it was valuable. We’ll link to that in the show notes.

For folks to get connected with you, very easy, you can go to yourfinancialpharmacist.com. At the top, you can click on home buying and then find an agent. From there, you’ll find an option to reach out and connect with Nate. Then you’ll be off and running with finding a good agent that’s local to your area.

Nate, as always, thanks so much. It’s been an awesome 2022 and looking forward to having you on throughout 2023 to provide our community with ongoing updates and information related to home buying.

[00:35:29] NH: Thanks, Tim. I really appreciate it.

[END OF INTERVIEW]

[00:35:30] 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 in 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 that 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 268: Buying a Home with Spiking Interest Rates, Inflation, and Market Insanity

Posted on by yfpadmin

Buying a Home with Spiking Interest Rates, Inflation, and Market Insanity

Nate Hedrick, The Real Estate RPh and co-host of the YFP Real Estate Investing Podcast, discusses how interest rates, inflation, and market insanity are impacting home buyers.

Episode Summary

On this episode of the Your Financial Pharmacist podcast, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, welcomes Nate Hedrick, PharmD, back to the show to discuss inflation, interest rates, and the market insanity impacting home buyers in today’s market. Nate explains how the current interest rates may determine the affordability of homes for many buyers and how the change in interest rates can even price some buyers out of markets based on the monthly payment buyers face when purchasing a home. He shares that with interest rates rising, people may pay a similar monthly payment for a home of equal or lesser size if they consider moving right now, leaving many folks “locked in.” Nate shares insight into how inflation affects home buying behaviors concerning supply and demand. He sees two patterns playing out in the market. Buyers are getting into the market as quickly as possible to try to beat future inflation, as well as potential buyers opting out of buying homes at this time due to the increased cost of living and fears of continued increases impacting their budgets. Tim and Nate close out with questions from the YFP Facebook Group about investing strategy, finding “white coat” loans, and best practices for working with a realtor when relocating out of state.

Links Mentioned in Today’s Episode

Episode Transcript

[00:00:00] 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 we got a chance to welcome a friend of the show Nate Hedrick, the real estate RPh and cohost of the YFP Real Estate Investing Podcast. On today’s episode, Nate and I discuss how interest rates, inflation, and market insanity are impacting homebuyers. Have a monthly payment at today’s interest rates is the same for $375,000 home, as it was about six months ago for a $500,000 home at lower rates. And how to find out more information on pharmacist’s home Loans, aka professional home loans, or doctor loans.

Now, buying a home or investment property is certainly an exciting experience but can feel overwhelming at times. Between finding an agent, securing your financing, and actually searching for a property. It’s hard to know where to start. And that’s why we’ve teamed up with my guests today, Nate Hedrick the real estate RPh, to provide a simple solution to jumpstart your home buying process. Through this concierge service, Nate will help you craft a plan, connect with a local agent that you trust, and stay by your side throughout the process to lend an ear for helping hand.

You can learn more about the free concierge service with Nate, and book a call by visiting yourfinancialpharmacist.com. Click on Home Buying at the top of the page, and then find an agent. Again, yourfinancialpharmacist.com, Home Buying at the top of the page, and then find an agent. All right, let’s jump into my interview with Nate Hedrick, your real estate RPh.

[INTRODUCTION]

[00:01:32] TU: Nate, welcome back to the show.

[00:01:34] NH: Hey, Tim. Always great to be here.

[00:01:35] TU: Really excited to have a conversation with you, as always, to tap in your expertise on what’s going on in the market more timely than ever right now. So, we’re going to talk about some of the market insanity, interest rates, inflation, the impact that that’s having for those that are looking at purchasing a home. But before we get to that, I’m dying to know, you made the transition since we last talked, a half time, in May. So, tell us more about that transition. Why you made that transition? Cutting back on some of your pharmacy work and what that has meant for you and your family?

[00:02:09] NH: Yeah, I had this moment I think I shared the last time we spoke. But I had this moment earlier last year where I realized that Lucy might, my eldest was going to be going to kindergarten in the fall, and just had this panic moment of like, “I’m missing everything. They’re growing up too fast.” So, my wife and I sat down and Kris and I really talked to a bunch about it and said, “Can we make this work? Can we cut back just to spend more time with them?” So, that’s exactly what we did. So, I cut back to half time, 20 hours a week, and it’s been a really awesome fit. We’ve been having a ton of time with the kids, taking them on vacations, doing fun, dad adventure, summer stuff. But I also feel like I’m still involved at work in a meaningful way, which is honestly the perfect balance for me right now. I’ve been loving this. It’s been great.

[00:02:50] TU: That’s awesome. Summer of being a dad, right?

[00:02:53] NH: Exactly. It’s been really cool. After we record this podcast, I think we’re going over to Memphis Kiddie Park. So, anybody from the Cleveland area that knows that, big shout outs. That’s where we’ll be after this, if you want to find me.

[00:03:03] TU: I love that. We have fond memories of that when we were up in the Cleveland area for about 10 years. So, that’s a great, great place for the kids. I’m going to link Nate in the show notes, we last talked on episode 254. We talked about home buying, search, what to do and what to avoid, including evaluating listings, why open houses exists, how to navigate that, how agents get paid, that’d be a great resource, especially for first time homebuyers. We’ve got a lot more content on the site, podcast, blog that Nate has contributed, related to home buying. So, make sure to check some of that out.

But today, as I mentioned, we’re going to be discussing buying a home in the midst of spiking interest rates, inflation, holy cow inflation, and market insanity. Shout out to David Bright, your cohost of the YFP Real Estate Investing Podcast for giving us the alliteration of the three I’s, interest rates, inflation and market insanity. That was his idea. So, I can’t take credit for that.

So, Nate, let’s start with interest rates. Where are we at, at the time of this recording, and end of July? We just had the Fed announced a hike of three quarters of a point. So, give us an update of where we’re at in terms of interest rates and where we might expect for some of this to be going.

[00:04:12] NH: Yeah, so if you’ve been living under a financial rock, you may have missed it. But for everybody else, obviously the interest rates have been going up. The Fed is raising those interest rates in an effort to fight our second I, inflation. As a result, we’re just seeing everything is costing a bit more in terms of lending. So right now, today, I look back, just in prep for this recording, and on 7/14, the 30-year fixed rate was running around 5.67% as a national average. If you look back even a year, it was under 4%, if not under 3%, in some extreme cases. So, we’re really starting to shoot up in terms of interest rate and it can really affect a number of things. It can affect affordability, and for a lot of people that means their monthly payment on a property or on a mortgage.

But it can also affect just lending in general, right? You might be pricing yourself out of a particular market. Because now, with the interest rates going up, you have a larger payment, which means you can’t afford the same size home, which means you might not be able to buy in the neighborhood you want to. So, there’s a number of things that are occurring as a result of that interest rate hike.

[00:05:16] TU: Yes, crazy, Nate. I think we’ve been spoiled. I graduated in ‘08, you graduated not too long after me. But we have been used to this ultra-low interest rate environment. So, I think some of this is just shocking to us. We talked to our parents and grandparents and they’re like, “5% 6%.” I remember numbers in the high teens, right? But we haven’t experienced that. And so, I think, this period of high inflation, we’re looking at 8%, 9% over the last year. What we’re seeing in interest rates, is really having a shock, and I think for many of us that look at things like monthly payment and budgets, especially for pharmacists that haven’t seen their pay necessarily expand proportionately, these things matter. They matter big time.

Let me give one example, Nate, and I’d love to hear your thoughts on how folks are thinking about this that are in the buying process. But if someone is looking at a $400,000 home, and let’s assume a 30-year fixed rate loan, just a couple years ago, 3% was not too far out of the equation in terms of a 30-year fixed rate loan. That’d be a monthly payment of just shy of $1,700 a month, or about $600,000, that they would pay for that $400,000 home over the life of the loan.

Fast forward, if we use five and a half percent, which were actually a little bit higher than that right now. But if we use five and a half percent, instead of 3%, we look at a monthly payment of closer to 2,300 instead of 1,700. So, about a $600 difference. And instead of $600,000 paid out of pocket over the life of the loan, we’re looking at a little over $800,000 paid out of pocket over the life of the loan. I would suspect, Nate, that for many folks, while that $200,000 difference over 30 years is somewhat shocking, it’s probably that monthly amount that really folks are looking at most right now. Is that right?

[00:07:01] NH: I think so, too. I’ll put a kind of a similar example to you that I’ve been using recently. If you’ve got a monthly payment on a $500,000 loan today, at three and a half percent. So really, common. Lots of people out there have this. In fact, over 50% of mortgage owners or homeowners today have a mortgage interest rate less than 4%, that’s a national stat. If you’re at $500,000 loan at three and a half percent, your monthly payment is 20 to 45. That exact same payment is what you would get today on a $375,000 house at 6% interest.

So, we’ve got people out there who are maybe living in a $500,000 home or have a $500,000 loan, thinking about downsizing saying, “Oh, I sell this property off, I built up a lot of equity, we’re going to move to a smaller home, $375,000 house.” But you’re going to have the exact same payment in that new home. So, it’s really starting to affect the market. Because if I’m that person, and I’m thinking about selling, why would you sell? You’re just giving away your equity for free and it makes it really tough when you start to break down that monthly payment.

[00:08:07] TU: Yeah, that’s a really powerful example, because I think all of us can relate to scrolling through Redfin, and Zillow and realtor.com. Looking at homes at different values, but when you start to factor in the interest rates and pay a $500,000, home at what was three and a half percent, same as about a $375,000 home today, wow, like that really starts to put it in into perspective.

So, Nate, when I think about inflation, and think about interest rates, a lot of this, especially when we were talking about kind of the impact of the economy, a lot of this becomes a snowball type of effect, where when I hear that 50% of folks that have a mortgage are under 4%, and then conduct that with the calculation you just gave, that has to be furthering the supply and demand issue, right? Because if I’m in the home on that right now. My wife, Jessica, and I were locked in at 3%. Maybe we’re itching for something different, new home, new area, whatever, you quickly look at the math and the numbers. You’re like, “Wow, we’re going to give up a lot on home to be able to make that move. And is it really worth it financially, considering, maybe equity that we built up over time?”

So, I would imagine this is just furthering the previous issues we’ve talked about around supply and demand. Is that fair?

[00:09:18] NH: Yeah. I don’t know that I have empiric evidence of this. But I think when you run the numbers like that, and sit back and think about it, it makes a ton of sense. If I’m thinking about – even if I’m thinking about moving across town, because I want a different location of house or I want a slightly bigger house, when you run that math, it almost becomes, “Well, maybe we’ll make this work for a while longer”, because it seems terrible to move right now. I don’t want to do that. There are no houses available and I’m paying more every single month for either exactly what I have now or for a slightly bigger home. So, it feels like people are going to be – I’ve actually heard this term thrown around recently called, locked in, where like you said, I’m locked into an interest rate. Why would I bother moving when I’m sitting on this for 30 years at a lower rate?

[00:09:59] TU: Yeah. I think the question that everyone has is like, is this the new norm? Are we going to see returns to lower rates? Because I think often folks might look at that and say, “Well, maybe I do make that move for X, Y, or Z reasons, and I hope to refinance in the future.” But the question is, like, are rates going to go up? Are they going to go down? Again, in the future, no one knows. But certainly, as we think about this, from a financial planning perspective, when we zoom out for a moment, we certainly don’t want to be banking on rates going down and refinancing a later point. If that happens, great. We increase some of the cash flow, but we want to be making sure that this fits into the budget, as is, in case that does not happen into the future.

[00:10:38] NH: And you said something earlier too, that’s super important is that, this is – we’re spoiled, right? Every one of us that’s sitting in our current generation looking at interest rates, we’re spoiled with the low ones, right? We’re spoiled at 3%. So, five and a half, 6%, seems very high. But I think that will actually become pretty normal again. I think that over time, we’re going to realize that that is actually where we’re going to end up. Like you said, waiting for them to come back down to these pre-4% rates, don’t hold your breath, I guess is my point.

[00:11:09] TU: Speaking of being spoiled, Nate, inflation, our second I is a category we’ve been spoiled as well, again, thinking of my peers that graduated around the time we did, or perhaps even sooner than that. Other folks that have been in their career for longer have experienced higher inflation time periods. But we’re at a point in time where inflation is the highest it’s ever been, and I think we’re looking at a 40-year period. The Consumer Price Index, rose a little over 9%, from a year ago. Perhaps we’re at the peak, perhaps we’re not. But you’re probably feeling this firsthand. I know, our family is, with our four boys, food bills are insane. Obviously, we know a gas has been doing.

So, my question here is, how is this rising inflation on top of rising interest rates in a competitive market? How is this factoring into the equation?

[00:11:58] NH: Yeah, I think from a real estate perspective, it’s doing two things. One is you’ve got some people who have FOMO, right? They’re afraid of missing out, so they are trying to jump in quickly, which is keeping demand up. Where I’m looking at this and saying, inflation is only going to get worse, real estate is basically the inverse of inflation, right? It’s inverse or it’s protected against inflation in some capacity. So, I want to get into a house now, while interest rates are still reasonable. I think they’re going to rise and inflation is going up and up. So, again, I think that’s keeping demand quite high.

We’ve also got people who are looking at it and saying, “I was at the top of my budget before, now I’m spending all this extra money on gas and food and everything else, maybe I’m going to take a step back and see what happens in the next six months. Because this is getting out of hand and I don’t want to buy in right now, where it might get worse, and then I can’t even afford this property.” So, I think we’re seeing both halves of that – both sides of that coin, and it’s keeping demand up in certain areas. But also, having some buyers step back and others.

[00:13:00] TU: Are you seeing, Nate, in conversations you’re having with prospective buyers, are you seeing a significant shift in the wish list and the expectations for home? You and I have talked about this before, but I think of my parents’ generation, and that idea of very much a starter home and I grew up in a – it worked, it was great, but it was certainly much smaller than the home that Jess and our boys live in, in terms of number of bedrooms, and space and size and finished areas, and all those types of amenities. And it really wasn’t until I graduated high school and was in college that they really took that step to the home, I would say they would categorize as their forever home. But we definitely have seen a shift, where that idea of like that forever home is coming much earlier in one’s career.

So, is this causing for many folks like a shift in expectations of, “Hey, maybe that idea of let’s get into a home doesn’t have everything we have or want. We can grow into it and maybe we look at pivoting in 5 to 10 years.” Are you hearing more of that?

[00:14:00] NH: I don’t know. I’m only an n of one, right? So, it’s a hard perspective to give. For me, I’m not seeing it affecting first time homebuyers that much. I feel like most of those individuals are looking at it and saying, “I want to get into a house. Here’s what I can afford.” And then you just kind of look at the market and see okay, well what does a $300,000 house actually get me and how many things can I get on my wish list? Yeah, where I am seeing it start to impact my clients is on the investment side. That interest rate is really, and inflation in general because of price of materials, price of contractors, price of everything is going up. It’s really starting to affect that wish list, right? I don’t want to be doing as much rehab work. I don’t want to be doing as big of a project potentially.

So that, I’m seeing change in terms of wish list. But right now, anyway, I think as a first-time homebuyer, this stuff doesn’t come up as much. You just kind of look at your budget, you work out the numbers, and then you look for houses. I don’t know that people are that intentional as you and I would be looking at something like this.

[00:14:59] TU: Yeah, and that makes sense, because of exactly what you said. If I’m starting a home buying search, I’m looking at my budget, I’m looking at the numbers, and then I’m putting those filters into whatever tool I’m using, and you’re then evaluating from there, what’s the best fit for you and your family. So, maybe for some folks that have been searching for a couple years, they can really, really see like, “Oh, my gosh, $300,000, $400,000 does not go as far as it did.” Obviously, just –

[00:15:24] NH: Yeah. Anybody with a pulse on the market is definitely seeing that, for sure.

[00:15:27] TU: Yeah. So, our third our I, market insanity. So, if we put together interest rates, we put together inflation, what are we seeing? I mean, national headlines, it feels like we’re seeing kind of a cooling off in the market. Your boots on the ground. We’ve talked about some supply and demand types of impacts. What have we seen in terms of the impact of interest rates and inflation on what seems to have been a very hot and active market over the last couple years?

[00:15:52] NH: Yeah, I still think it’s a pretty hot market. It’s shifting in subtle ways, though. So, the two big things that I’m seeing is, again, you’re seeing national headlines about like price decreases in certain areas. I think with a lot of that price decrease is coming from, is places that were previously overpriced, or at the top end of a particular market threshold. So, if I’m looking at a neighborhood where all the houses are $250,000 or so, yeah, and somebody fixes up a place, lists it for 300 grand. Well, a year ago, that probably would have sold like that, and somebody would have paid over asking, over appraised value and not cared, right? Because that was just the market that we were in.

Today, those are not selling. People are not as able to overpay for a property as they were a year ago. So, I’m seeing those houses be the ones that get the price decreases, the people who are trying to be greedy for lack of a better word, and trying to tap into that crazy market, those are the ones that I’m seeing get danged.

The other area I’m seeing some shifting or some slowdown, is in the property that need a ton of work. So again, with the market we had 6, 12 months ago, even if your property was really in disrepair, you could usually get away with selling it pretty quickly. There were tons of investors out there, tons of capital, lending was super cheap, everybody wanted to buy something. So, you could get away with that, right? Someone would buy it, they would fix it up themselves and do something with it.

Well, now, with interest rates where they are, it’s harder to refinance out of that. You don’t know what the next six months is going to look like. So, I’m seeing investors who would have taken on $100,000 projects, $200,000 projects, are just stepping completely away from those. So, I’m seeing a lot of properties that are at that bottom end, that need a bunch of help. And they’re just sitting there and nothing’s being done to them.

[00:17:33] TU: That makes sense. That makes sense. I want to pivot here for a little bit, and a few years ago, you helped us put together a really awesome first-time home buying guide, we’ll link to that in the show notes. It’s yourfinancialpharmacist.com/homebuying, and you go through six steps for the first-time homebuyer. What I want to do is pick your brain a little bit of when you wrote that, the time period you were in, right now, are two very different time periods. I think as we look back on that now, different market in terms of buyer’s market, seller’s market, obviously, some of the factors that we’ve talked about here today and it’s just different.

So, as we look at some of these factors around being ready, and looking at what’s important, and negotiation, and inspections, and all those types of things, it’s a different landscape that we’re in today. So, I’m going to pick your brain here on a few moments of some of this. The first step, Nate, that you talked about in that guide, is make sure you’re ready. Know your budget, thinking about other debt, debt to income ratios. We’ve talked before in the show, but I want to highlight again, the 28/36 rule from a lending perspective. What is it, first of all, and what’s changed over the past couple of months, or even just the past year as it relates to lending? As folks are looking at, what they may or may not get approved for?

[00:18:48] NH: Yeah, great questions, Tim. So, the 28/36 rule, just to kind of highlight that for a second is the idea that lenders are going to look at your debt to income ratio, and give you an idea, a lending decision based on that number. So, what the 28/36 rule says is that you cannot spend more than 28% of your gross monthly income on housing expenses, and no more than 36% of your gross monthly income on all debt. What that can look like for, again, just to put a pharmacist’s example out there, is that if I’m adding up all my outstanding debts, meaning student loan, meaning the debt from my mortgage, anything that is a monthly payment, I had to pay credit card debt, you name it, it’s getting turned into that. And if that number exceeds 36% of my total gross income, they may deny you for that property.

So, those rules are still in place for a conventional loan established by – it’s backed up by Fannie Mae or Freddie Mac. But what we’re starting to see, the shift that I’ve been seeing, at least over the last –even going further back six, eight months ago, is letters that were kind of playing with that rule a little bit, using non-conventional products for certain individuals to try to get them into properties that they could afford, and really trying to push that limit. So, again, those rules are still in place. They absolutely need to be there for Fannie and Freddie Mac lending. But it is starting to shift a little bit in terms of the types of loans that lenders are offering up or that they are recommending to buyers, because there might be alternatives that can help them.

One of the things I’m seeing a ton of right now is lenders pushing arm products, adjustable rate mortgages, where that 28/36 rule might not apply, right? Where you’re going to have an adjustable rate after three years, or five years or seven. So, there’s changes in what’s going on in terms of the types of lending, but a lot of those rules are still in place.

[00:20:29] TU: Which is a really good place to remind folks that, as we’ve hit so many times on the show before, you really have to drive your budget and think about how this is fitting into the rest of your financial plan, especially, as prices are going up. If you are looking at a non-conventional product that increases that amount that you’re able to land, does it still fit within the context of your budget or not?

Nate, for those that are listening that have now had their student loans on pause for more than two years on the federal side, and we’re awaiting momentarily some updates on that, about the extension or not. Remind us of how those have been factored in? Or how lenders are looking at the loans where they have been making a payment.

[00:21:12] NH: Yeah, so it’s tricky, because the lenders can’t see that exactly right. So, they see that you’re paying zero, but that doesn’t tell them what they’re actually going to be paying. So, what I’ve seen from lenders, and again, not a lender, so don’t quote me on this exactly, but what I’m seeing from lenders right now is that they are trying to basically guess at what your payment is going to be. If you have past records you can provide them with and say, “Look, my normal payment is $1,400 a month, but now I’m paying zero.” They’re factoring that in. They know these are coming back at some point. If they’re wrong, if they don’t come back, for whatever reason, better to err on the side of caution.

So, those are still being factored in. You absolutely should factor that into your budget, because again, best case scenario, these go away somehow, or they get reduced or whatever. But you got to plan for that worst-case potential of these payments come back and they come back in full force.

[00:22:01] TU: That makes sense. Related to the making sure you’re ready in the budget, the other question I have for you is on the down payment. I would think in theory, that as home prices go up, as people are feeling stretched more month to month and budget, there might be more folks that are looking at some of those non-conventional options, where they’re not having to put 20% down on a conventional loan. Simple math, right? If you were a few years ago, looking at a $300,000 home, you’re looking at $60,000 down, 20%. $500,000 home, let’s say in today’s kind of market of what it is, obviously, that’s $100,000. So, that’s a significant difference in cash that you’re foregoing.

And so, folks are looking at, okay, not only is the potential for the down payment going to be higher, but also, we’re looking at a monthly cash flow difference because of interest rates. Are we seeing or do you anticipate seeing more folks are looking at some more of those non-conventional products where they’re having to put less down, and looking at different loan types that are out there?

[00:22:56] NH: Yeah, for sure. I think especially with the raising prices of homes in general, people who are sitting in the sidelines trying to save up enough money, they’re seeing their actual ratio of money saved versus down payment needed, decreasing as they fill up their account, right? And that’s just because the prices of homes are outpacing the ability they have to save. So absolutely, we’re seeing more people use those lower down payment options.

I was just talking to a lender yesterday or the day before, and he said he’s actually have a ton of pharmacists who are using FHA lending right now, not because they have bad credit or need FHA –pieces that come with FHA, but because they can do it at three and a half percent down. And so again, it’s interesting to see how things are shifting based on the rising interest rates and the increases in overall home values.

[00:23:42] TU: Nate, one of the other things we talked about in that guide, as well, as negotiating. Step five, you talked about find your home and negotiate. What leverage, if any, does exist in this current market of negotiation? Are we starting to see, in some cases, you mentioned just a few moments ago, that there may be scenarios where some homes that were just flying off the market are going for less than asking? Is there any place for negotiation in today’s market?

[00:24:08] NH: There is. It’s better than it was, certainly. I think, in those two areas that I mentioned before, the bottom of the market, and the very top, there’s a little more flexibility now. That middle zone, though, is still absolutely crazy. I’m seeing properties that when they come up, and they’re nice and priced appropriately, they’re still 10 offers and it’s inspections being waived, and all the other craziness that goes with it. So, it depends on where you’re buying. But absolutely. I’ve had a client recently that was able to get a pretty good deal on an investment property, just because they were buying a place that needed a lot more work and nobody else wanted to touch it. So, they were looking a pretty good deal on that.

[00:24:47] TU: You mentioned inspection waivers in those cases where there still are multiple offers, and that was my question for you as well is, have we seen any of that cooling off? Where there’s inspection waivers, we talked about appraisal gaps, people might need some cash, more cash at that table than they were anticipating. Is that cooling off at all? Or, again, just market specific type of property and the amount of demand that’s there?

[00:25:08] NH: Yeah, it’s pretty market specific. I was just speaking with a pharmacist last night, that is actually a pharmacist and her husband. And her husband is a structural engineer. He was looking at a property for a client, that the piers under the house, were leaning 20% or something crazy. Again, they probably waived inspections before they bought that property. And now, it’s a big problem. So, it’s still out there. It’s very market specific, but it’s still being done, and I still do not recommend it.

[00:25:37] TU: Again, if folks want to download that guide, yourfinancialpharmacist.com/homebuying. We’ll link to that in the show notes.

Nate, I want to pivot to a few questions that we got from the YFP community in our Facebook group, leading up to this episode, and if folks are not yet a part of that group, I would encourage you to join that awesome community more than 8,000 pharmacists across the country that are asking great questions engaging with one another, challenging one another, sharing wins, and so we’ll link to that in the show notes as well.

First question we have from the group for you is how are you changing your strategy for investment properties, given the current conditions that we’ve discussed on the show?

[00:26:12] NH: Yeah, so me personally, the biggest change that I’m seeing is just planning for interest rates to continue to increase. So again, if you talk to me a year ago, I was all in on BRRRR investing, right, the idea of buy, rehab, rent, refinance, repeat. I still love the idea of BRRRR investing, but it’s getting more difficult because you’re talking about buying a property today. If you’re doing it with cash, or you’re doing it with even a mortgage that you’re going to then change down the road, that mortgage down the road, you know it’s going to be a higher interest rate and it’s hard to predict how high it’s going to be. So, it makes it a little trickier to make sure that your numbers are getting right.

So, we actually had a property that we’re dealing with right now. I actually just posted about this in the YFP REI Facebook groups, take a look, that we were going back and forth about whether or not we’re going to sell it, or rent it. When we bought it, it was all in. Like we were going to rent it, we were going to BRRRR it, we were going to cash out, refi. Well, if we cash out and refi’d today, with the amount of work that we put in, we’d be doubling our loan amount and doubling our interest rate. And again, because we bought it with a mortgage upfront, and then we were going to cash out, refi to a second mortgage or different mortgage. That strategy, basically, it could work, but it would totally destroy our cash flow. So, we made a decision to just leave it alone. We’re going to let that money kind of sit in the property for a while, as holding equity, and figure it out later if there’s a better time to refinance. So, it’s changing my philosophy in that way a little bit, but I’m sure it’s impacting others similarly.

[00:27:37] TU: That question actually came from Jenny, who we’ll link in the show notes. But Jenny White, we featured on the YFP Podcast Episode 148, how her and Mike got started in real estate investing. And you and David have also talked with Jenny and her husband, Mike, on the YFP Real Estate Investing Podcast, episode five. So, we’ll make sure to link to both of those in the show notes.

Second question is how to find white coat home loans? This question comes from Cassie. So, referring you here to Dr. Loans, pharmacist home loans, there’s different terms that are thrown out there. But quickly, Nate, what are those loans? And then information on where folks can find that?

[00:28:12] NH: Yeah, absolutely. So, there are loans that again, would typically fall into the conventional realm. But there’s different parameters out there for certain types of buyers. The ones that Cassie is referring to here are again, called professional loans or physician’s loans or pharmacist loans. The idea is that because of your profession, because of your potential of earned income, banks look at you a little bit different. They’re giving you basically some credit for the potential of your earned income. So, they’ll maybe give you a break on interest rate, or oftentimes, what we see is that they have very low-down payment options is the most common type.

We at YFP, have worked with first horizons in the past. There are many other loan officers out there, loan lenders out there that will do this type of investing or this type of lending, excuse me. But the idea is the same, where I can get a pharmacist home loan at two and a half or three and a half or 5% down only, but it has more conventional terms where I’m not paying PMI, I’m not getting hit on my interest rate, again, because of that potential earned income down the road. So, definitely worth looking at. I know we’ve got some great resources on the YFP page for accessing first horizons. And again, there are other investor or pharmacist friendly lenders out there as well.

[00:29:25] TU: Yeah, if folks want to learn more about that, you can go to yourfinancialpharmacist.com/home-loan. We’ll link to that in the show notes. And typically, Nate, just to build on that a little bit is usually there’s minimum credit scores that are involved in their maximum loan amounts, so folks can look at that based on region they’re in, budget, what they’re looking at. So, another resource I’d point to is the white coat investor has a list of some of the doctor loans that are out there. Many don’t offer that to pharmacists, but some do. So, to Nate’s point, there are several options that are out there.

Our third question, Nate, comes from Ivana and she asks advice on how to interact with a realtor when relocating to a different state and seeing homes in a relatively short period of time. What are the right questions to ask during that home buying process? That’s a great question.

[00:30:09] NH: Yeah, it is. And it’s something that we actually deal with quite a bit, where you get a pharmacist that’s maybe finishing residency, for example, and then moving across country for a job, or vice versa. They’re moving from their home state, and they’re going out for residency, and hopefully a future job, and they’re looking at buying. So, it makes it really tough. I’ve done this before with other clients, and generally, the recommendation I gave is figure out first what your level of comfort is, right? So, do you need to see that property in person to feel comfortable with it? If the answer is yes, then you’re going to have to do a lot more coordination of okay, realtor, we’re going to be in town for Saturday and Sunday, I need you to set up for showings on Saturday, five on Sunday, and we’re going to just go whirlwind look at all these. Or are you going to be comfortable giving an idea to your agent of what you’re looking for, and then doing video walkthroughs or virtual walkthroughs.

So, I think stepping back and looking at your own perspective of what is my comfort level, and then finding an agent that’s going to be able to work with you at that comfort level. I think that’s super important. So, I’ve worked with clients that do both, that want to fly out, or drive out and see the properties themselves. I’ve worked with those that are like, “Hey, send me some videos, Nate, post them into a Google Doc, and I’ll look at him after I get off at work.” It’s your level of comfort. I think the questions to ask is around that level of comfort. So, if you decide one way or the other, how am I going to work with that agent within that realm that I’m looking to follow.

[00:31:29] TU: And that question is a great segue, Nate, into the YFP home buying concierge process that you lead, and we’ll link to that in the show notes, and we mentioned it in the introduction as well. Folks can go to our web page, yourfinancialpharmacist.com, click on Home Buying, find an agent, and they’ll see Nate’s face and more information about the work that he’s doing to connect individuals that are looking to purchase a home with an agent in their area that has been vetted, and that certainly aligns with what Nate talks about here on this show, and the educational strategy that he has. So, Nate, tell us about that service. I’m looking to buy a home, I’m looking for an agent, perhaps it’s a situation like Ivana, where it’s relocating to a different state, or perhaps it’s even in their area where they’re not already connected with an agent. What’s involved and how can they get connected with you?

[00:32:15] NH: Yeah, the whole goal of this service is really take the guesswork out of finding a really high quality agent. So, we’re going to go out and actually interview agents on your behalf, or we’ve worked with those agents before with other pharmacist clients. So, we can get you connected with that individual free of charge, so that you can get off and running on the right foot, and not have to worry about does this person have my best interests in mind? Are they just trying to get me to buy and move on? Right? We’re looking for people who are going to be interested in building relationships, who know how to communicate, know how to deal with the pharmacist busy schedule, and are going to listen to what your actual needs are. Not just how do I get this person to buy a house as fast as possible.

So again, the whole idea of that service is that you’re going to meet with me for 30-minute planning call, maybe even less, and we’re going to talk through things like budget. We’re going to talk through goals, must haves, answer any questions you have about the home buying process, and then we can use that information to get you connected with an agent who is going to be a really good fit for you.

The other cool thing about the services that we don’t go away, once you connect with that agent. We remain on your team. I remain on your team, so that if you’ve got questions or just want a second opinion from somebody, you know who to come back to, and you can get that from somebody who has that experience on both the pharmacist side and the real estate side. So, definitely recommend checking that out. It’s a great way. If you don’t know where to get started, it’s an awesome place to jump in.

[00:33:32] TU: And again, that’s yourfinancialpharmacist.com. Click on Home Buying, find an agent, you’ll see more information there. And Nate, I would point folks to Episode 160, where you interviewed Bryce Platt and Shelby Bennett talking about their experience going through the home buying process with the YFP concierge service that you lead. So, folks are looking at more information on what it is, as well as other pharmacists that have had that experience and talking through that experience. Make sure to check out Episode 160 on the YFP podcast.

Nate, as always, I love having your perspective on this very important topic for the YFP community. So, thank you so much for taking time.

[00:34:06] NH: Yeah, Tim. Thanks for having me here.

[OUTRO]

[00:34:08] 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 in 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 post and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analysis 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 251: Zero to One: How to Get Started in Real Estate Investing

Posted on by yfpadmin

Zero to One: How to Get Started in Real Estate Investing

On this episode, sponsored by Insuring Income, Nate Hedrick and David Bright, co-hosts of the YFP Real Estate Investing Podcast, share their top tips and strategies for getting started in real estate investing.

Episode Summary

The concept of real estate investment can be so broad, with many different avenues you can choose to take, that getting started can feel like a daunting task. One key concept to ensure that you can weather the storms that may come when investing in real estate is to, first and foremost, get your own financial house in order. By building a firm financial foundation, risk-averse pharmacist real estate investors can be more confident with the ups and downs in this ever-changing market. This week, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, welcomes David Bright and Nate Hedrick, co-hosts of the YFP Real Estate Investing Podcast, back to the show. Top moments from the episode include David discussing the main categories of real estate investing and why he and Nate have favored buy and hold investment strategies. You will also hear a frank discussion on the individuals you should consider surrounding yourself with as a part of your real estate investing team, plus a few strategies for finding and evaluating an investment property. Nate and David also take a few moments to answer some frequently asked questions about real estate investing for those getting started in their real estate investing journey.

Key Points From This Episode

An update from David and Nate regarding their coaching program.
The importance of having a strong personal financial foundation.
How to break down real estate investing.
Categories best suited for first-time investors.
Nate shares the team aspect of real estate investing to bring down the stress and reduce the barriers to entry.
Where to find a good investment property: off-market.
The importance of being able to define and state your criteria to a real estate agent.
Using math to evaluate an investment and what that looks like; setting up categories.
FAQs you’ll hear when starting in real estate investing.

Highlights

“Getting your [own] financial house in order, [is] such a critical first step before you go on that journey to invest in real estate.” — Tim Ulbrich, PharmD [0:05:34]

“Having a firm financial foundation beneath you means that you can weather some of those storms and deal with some of those ups and downs of real estate.” — David Bright, PharmD, MBA, BCACP, FAPhA, FCCP [0:07:13]

“We’re investing in houses that are far enough away that we’re not going there and we’re not in that day to day aspect of the investing, which is really helpful when you work a full-time pharmacist job and you don’t want to be distracted by your real estate investing.” — David Bright, PharmD, MBA, BCACP, FAPhA, FCCP [0:22:02]

“To be considered a good investment property, it needs to pay for itself every single year, year in and year out, and put money back in your pocket. Running [those] numbers is important and not just looking at the simple things but truly diving into the details.” — Nate Hedrick, PharmD [0:24:30]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] 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 had a chance to welcome back onto the show, David Bright and Nate Hedrick, co-hosts of the YFP Real Estate Investing Podcast. During the interview, David, Nate, and I talk through zero to one, how to get started in real estate investing and make the hardest move, which is that first move.

Some of my favorite moments from the show include David talking to the main categories of real estate investing and why he and Nate have favored buy and hold investment strategies, a discussion on individuals you may consider surrounding yourself as a part of your team as you begin your real estate investing journey and strategies for finding and evaluating an investment property.

Make sure to hang with us to the end of the show when I ask David and Nate frequently asked questions for those getting started in their real estate investing journey. Now, one of the things that we talk about on today’s episode is why getting the financial house in order is such an important and crucial first step before diving into real estate investing.

That is a great opportunity to highlight what I think many folks may not be aware of, which is the incredible work that the team at YFP planning does and working one-on-one with more than 240 household in 40 plus states.

YFP planning offers fee-only, high touch financial planning that is customized to the pharmacy professional. If you’re interested in learning more about working one-on-one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com.

Whether or not YFP Planning’s financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom.

Okay, let’s hear from today’s sponsor, and then we’ll jump into my interview with David and Nate.

This week’s podcast episode is brought to you by Insuring Income. Insuring Income is your source for all things term life insurance and owned occupation, disability insurance. Insuring Income has a relationship with America’s top-rated term life insurance and disability insurance companies so pharmacists like you can easily find the best solutions for your personal situation.

To better serve you, Insuring Income reviews all applicable carriers in the marketplace for your desired coverage, supports clients in all 50 states and make sure all of your questions get answered. To get quotes and apply for term life or disability insurance, see sample contracts from disability carriers or learn more about these topics, visit insuringincome.com/yourfinancialpharmacist. Again, that’s insuringincome.com/yourfinancialpharmacist.

[INTERVIEW]

[0:02:40.9] TU: David and Nate, welcome back to the show.

[0:02:43.8] DB: Hey Tim, always great to be here.

[0:02:45.7] NH: Yeah, thanks so much.

[0:02:46.8] TU: First of all guys, congratulations on the work that you’ve been doing with the YFP Real Estate Investing Podcast. You’ve crossed the 50 episode threshold, which is really an incredible accomplishment and I think it just speaks volume to the commitment of time and energy and effort that you guys have put in so thank you so much for that and it’s been fun to see the reception among the pharmacist community in terms of the focus here on real estate investing and the community of pharmacist and I think that’s a good segue.

I’d love to hear from you guys, just for a moment, an update on what you’ve been up to. When we talked last at the turn of the year, you guys were just getting started with the none to one group coaching program to help folks begin their journey in real estate investing. So, David, Nate, we’d love to hear the update of how that course has gone and what you’ve been seeing.

[0:03:34.7] NH: Yeah, we had a ton of success with that. It’s been really fun to bring together this group of pharmacist that are really eager to buy their first investment property. We actually ended up taking on 10 pharmacist and we are meeting every Sunday for the past two months now, David, and it’s been going really well. It’s a really cool class of individuals, it’s been a great time to talk to everybody and learn along with them, right?

We’re there to teach and kind of coach but at the same time, there’s always more that we can learn and so it’s been really interesting to have problems brought to us and we’re dealing with people all over the country, so it makes David and I expand our horizons a bit. It’s been really enjoyable.

[0:04:08.0] DB: Yeah, it’s also been a lot of fun to see the victories come out too, right? The problems are one thing and the problem solving is like inherent to pharmacist so we enjoy that, right? The victories are also a lot of fun seeing folks who get offers accepted and move through inspections and conquering that investing world has just been really inspiring to see other pharmacist jump into that and do that.

[0:04:27.0] TU: We’re excited to hopefully share more of those stories into the future and be able to offer that out to other pharmacists as well so we really appreciate you guys and the commitment you’re putting enough time, we’re recording here on a Monday, early morning, you guys are up last night with that group. I know it’s got energy and enthusiasm that you’re putting into it as well but it is an investment of time, so thank you guys so much for that work.

This is a follow-up to episode 241. We talked before and we’ll link to that in the show notes about some common objections and barriers to getting started in real estate investing and the idea with this episode is that for those that have worked through or are working through some of those objections and are ready to make the move, what should they be thinking about in terms of going from none to one, right? That hardest move that we often hear folks talk about in the real estate investing journey.

Let’s get started, I want to jump in and talk about the importance of having a strong personal financial foundation, it wouldn’t be a YFP podcast if we didn’t talk about that. Getting your financial house in order, such a critical first step before you go on that journey to invest in real estate. Let’s start there, Nate. Tell us more about why you and David emphasize this concept so often on the YFP Real Estate Investing Podcast as well as for your own personal journey why this has been so important.

[0:05:49.4] NH: Yeah, it’s something we reinforce all the time, right? Even the very speaking in the none to one, the very first half of the first class was all about, like, “Okay, you need to establish your own financial house and if you don’t then we need to take a pause and reset,” because without that, right? Nothing else can really track from there, right? We need to make sure that our own financial house is in a state where we can feel comfortable investing and that that investment decision is not going to be make or break, right?

We are very risk-averse, safety-oriented pharmacists as David and I like to say and with that, comes the concept that you need to be in a position where if things don’t work out perfectly, you’re going to be just fine financially. These are decisions we’re making not in a do or die situation, right? We’re trying to buy these properties or invest in a way that it supplements our financial plan, rather than, is the make or break piece of it.

[0:06:39.3] DB: Yeah, and there’s a lot of just potential instability or seeming instability in terms of real estate investing versus a lot of other types of investing. Kind of like in your personal budget, if you’re saving up for a car, you might be putting away money every month and eventually that car happens. There’s same kind of thing with the real estate investment if you may need to save monthly for a roof replacement or save monthly for furnace placement that’s coming at some point though those kind of things maybe a little harder to plan for.

So those evictions, late rent, there’s just a lot more instability and so having a firm financial foundation beneath you, means that you can weather some of those storms and deal with some of those ups and downs of real estate, knowing that in no month is it ever coming out perfect, that all of the bills just perfectly line up but over time, hopefully, the average is added to something and ends up being a good investment.

[0:07:29.4] TU: There’s lots to dig into of course in that topic, in that umbrella, building a strong financial foundation, we’re not going to do that here today because that’s what we do every week on the show but I would point folks to episode 212 where I talk through some of the components of building a strong financial foundation, what does that exactly mean and why is that so important as you begin your real estate investing journey.

We know that real estate investing is such a broad umbrella and I think that’s one of the things that you guys have done such a nice job on the YFP Real Estate Investing Podcast is really introducing folks to the variety of different ways that they could invest in real estate but I think that because it’s so wide and because there’s so many options, that can be intimidating for a new investor. So David, tell the us more about how you and Nate break down real estate investing and what categories might be easier for first time investors as they get started?

[0:08:21.3] DB: Yeah, there are plenty of different avenues for real estate investing, kind of like the professional pharmacy, many different ways that you could practice pharmacy. As far as real estate investing goes, Nate and I like to break this down into buy and hold real estate investing where you just buy something, you rent it out long term, or flipping real estate where you buy it, you may fix it up and you may quickly then sell it.

You could apply those terms to single-family houses or multi-family apartment buildings or storage units or vacation properties or so many different categories. Just to make things pretty simple and to stay with areas of investing where people have some general familiarity often times just from buying their own primary residence, we talk a lot about the single-family, buy and hold, long-term rental where you’re simply buying a house, presumably a lot like what you live in and renting that out to someone else so that that simplicity and the clarity of buying a single-family house seems to be one way that people can make an easier jump into real estate investing.

It seems just a lot less intimidating to go buy a single-family, three bed, one and a half bath house than it is to buy an apartment building or buy a strip mall or buy a storage unit complex or something like that, there’s ways to dial back the intimidation factor that way.

[0:09:40.8] NH: Yeah, at the same time, we got a lot of people that come to us and say, “You know, Nate, I want to buy a vacation rental anyway, tell me about the short-term rental thing, you know? Can we do that?” And so there are other ways to get more adventurous with it if that’s what you want to go, where you can buy a property that you can use on the weekends here and there for the rest of vacation property and then rent it out the rest of the year.

We also see people and we’ve talked to individuals that are house flippers or even wholesalers where you’re taking basically, a great deal putting some capital into it or maybe very little capital into it and then flipping it to someone else. There are lots of options out there and just like David said, it’s just as diverse as pharmacy, you can – the term real estate investing is so broad, there’s so many different avenues you can walk down.

[0:10:18.0] TU: Yeah, for folks who haven’t yet listened to the many great stories on the real estate investing podcast, this is one of the areas that I love that you guys have done. I think really focused intently on the buy and hold strategy, David, for the reasons that you’d mentioned but you’ve also featured and then sprinkled some other areas to show the diversity that can be there, you know?

I’m thinking about the recent episode 46 where you had on Stuart and Elizabeth talking about motel hacking. I know you’ve had a couple of folks talking about short-term rentals so certainly, a lot of buy and hold, more of that traditional investing stories but other avenues that folks maybe thinking about as well. Now, I’ve heard you both talk a lot about the team aspect of real estate investing as a way to bring down the stress, reduce the barriers to entry.

Nate, do you mean investing in partnerships when you talk about the team, finding a mentor or something else altogether?

[0:11:06.8] NH: Yeah, it’s kind of a little bit of everything right? There’s nothing wrong with a partnership or a mentor but a lot of times, we focus on just building this team around yourself that can help and it can be something as simple as the YFP community, right? As part of your team, you’ve got people that are helping you out, supporting you in those decisions, helping make things just a little bit less stressful but really, truly, that team that surrounds you, starts with a good real estate agent.

Someone that has your fiduciary interest and making sure that you’re going to be successful and really, as that starts to expand, then your team can expand as well. You know, when we talk about building a team, it sounds really intimidating and so we really try to focus more on starting with really good core individuals around you and then expanding from there and then as you build your confidence and as you start to expand what your kind of projects you’re able to take on.

[0:11:50.3] DB: Yeah, that’s absolutely how we guys started to, we started with the realtor from our own investing and that realtor helped us, the first property that we bought, we needed someone that new plumbing because there’s a plumbing issue so I asked the realtor for a contact for a plumber, the realtor offered us a few different contacts, we were able to find a plumber. From there, we needed someone that could do dry wall, we reached out to the realtor.

And so, our team grew very organically just in terms of reaching out to that realtor, even when it came to an insurance agent or a property manager, those connections all happened just from that initial networking through that initial realtor and then contacts from contacts and going from there.

Even like Nate mentioned on the Facebook group, online connections, online networking, other local real estate meetups, we were able to over time add a book keeper and a tax accountant an attorney and lenders and other folks from there so you know, absolutely, that can sound intimidating on the front end of this enormous team that feels like is necessary when you listen to podcast and read books but for us, it just started out with a realtor and one foot in front of the other. Finding one contractor at a time as we needed people on our team growing that organically.

[0:13:01.6] TU: Love the simplicity of that, David. I’ve heard you and Nate mentioned that before as I think folks often hear stories of investors that have been at this for several years and they’ve got that team, right? They’ve got contractors, they’ve got insurance agents, they’ve got property managers, they’ve got, on the financial side where there’s bookkeeping, individual financial planning, tax side, they got attorneys, they’ve got a team that has really been built over time but they didn’t start there and so I think that step of my team and having that team in place can often paralyze folks if that’s something that they don’g think — maybe I can start with one individual, what if I start with a really good realtor that can help me take that step forward, that’s feasible, that’s manageable and then I can build my team out over time.

If I’m listening and I’ve narrowed down the type of real estate investing, let’s say I’ve determined what type is a good fit for me at least to get started, I thought a little bit about the team or finding that agent who is going to help me overtime, build out that team. The next question I think that comes to mind, especially in the current market is, where does one find a good investment property? Am I leaning on my team here, am I doing my own search on Zillow? Nate, what are your thoughts here?

[0:14:11.2] NH: Yeah, I think it’s a common question we get and I think the misconception that comes to us often is, the only way to find a good investment property deal is off-market because especially if you listen to some of the bigger players, people that are doing this for a long time, they find some of their best deals off-market but that’s not the only place to find them and so I think, again, that’s another intimidation factor that David and I really focused on dispelling is that there are absolutely deals that you can find on Zillow on the MLS or your real estate agent, you can go off-market and there’s advantages and disadvantages to doing that but you don’t have to.

Even something as simple as connecting with a good agent, getting an MLS, auto email setup and what I mean by that is, you put your criteria and your budget into the system and every morning, you’re going to get an email that says, “Here are the houses that meet your criteria,” and starting to understand your market, you’d be surprised at how quickly you’ll start to find a deal because now, you know everything in that market and so when a property pops up, now all of a sudden, you know, “Yeah, that one’s worth looking at” or “No, we can skip it, that’s not worth our time.” It just makes that deal-finding so much easier.

We were actually just talking about this last night on the none to one course about an individual that’s like, “I know there’s exactly 10 duplexes available in this particular area when the 11th one pops up, I know what to do in terms of whether or not it’s worth offering on” and that is how you really understand the market and when a good investment property comes along, you can really take action on it.

[0:15:29.4] DB: Yeah, I think that’s really important. One of the things that Nate, that you said there was the word criteria. I think that that makes it so helpful for a real estate agent that you’re working with when you define, we need to say, I’m looking for a great investment property, the realtor in the other side there is like, “What precisely do you mean? What am I looking out for you?”

That can be really puzzling but if you’re saying that, “I’m looking for a duplex between this street and this street, around this school” when you can be that clear. “At this price point, I want one half to be vacant, one half to be tenanted because I want to move in and house hack.”

Whatever those criteria are, the more precise and specific that you can get for that real estate agent, the easier it will be to find a search, even if there are only 10 on the market right now in that example, it’s so much easier to identify that when it pops up and to jump quickly, which is a big thing in this market is not falling into analysis paralysis once you see that opportunity but being ready to jump on that when it shows it face.

[0:16:29.3] TU: Yeah, speaking of analysis paralysis, you know, I think that pharmacists, it’s safe to say are very numbers-oriented and so when I hear you guys talk about like criteria and is it worth it, I am sure that many would be relieved if there is a sure-fire way to run numbers, identify if an investment is a good one or not and so you guys just released episode 50 where you talked about a spreadsheet analysis.

That brings comfort to me as a pharmacist, right? I can put numbers into the spreadsheet and that can at least help guide me. Tell me a little bit about how someone can use math to evaluate an investment and what that looks like?

[0:17:02.7] DB: Yeah, the math I think sounds intimidating right? When we talk about math pharmacist think like amino glycosides and it gets really complex in a hurry but when we talk about math in the real estate standpoint, it is relatively simple compared to what we do in the pharmacy world.

There is a common misconception that as long as the rent is higher than the mortgage payment, I will be making money and I feel like that is one of the key drivers behind the episode that we had to walk through the numbers and what are the other expenses that you may not be anticipating but they factor in.

So things like paying a property manager, if you choose to not self-manage the property or paying for those repairs and those larger expenses like we mentioned the roof and the furnace and things like that that if you own the property long enough, you will have to replace those things and setting aside money for that.

There are a lot of other smaller expenses that are easier to overlook and so again, that’s kind of the driver of setting up that spreadsheet and not just setting that up to make sure that those categories are captured but also setting that up with some notes in there to make sure that the information going in is good.

If you have your estimates wrong on each of those categories, it’s going to be a garbage in garbage out kind of analysis and it will be hard to trust those numbers, so we try to spend some time in that episode to talk through what are those categories, how might you estimate those, how would you get a little more precise in that math so that you have a better idea of how you might expect that property to perform from an investing standpoint.

[0:18:33.2] NH: Yeah, really good point David about the numbers and not getting too lost in the spreadsheet. It is important to use and it’s a great way to start using math to evaluate a property but you’d be surprised the amount of things that you can catch that don’t have to do with math, right? Maybe the property you’re looking at is on the same street as another one that you like or another one you are comparing it to but it just so happens to be right across the school district line.

So now, it’s not the same school district, which means it affects the property value or it affects the rent rate and so there is all these little nuances that can go along with it, and again, that’s where your team can kind of come in and help you out. Again, relying on that real estate agent, relying on maybe a property manager to help with rent rates and just taking a double look at things, once you’ve done the analysis to make sure that it actually marches out in real life.

If you are interested too, I don’t think we’ve dropped this here but I would mention in episode 50, we actually put together that spreadsheet that you can download yourself. If you head over to yourfinancialpharmacist.com/analysis, you can download that spreadsheet for free. A great way to again, run the numbers the same way that David and I do.

[0:19:25.8] TU: Awesome, thank you guys so much for putting that together. Again, yourfinancialpharmacist.com/analysis, we’ll link to that in the show notes. All right, so we’ve talked about several things so far. We have talked about the importance of having a strong personal financial foundation before we jump into real estate investment. We’ve talked about the different categories, the aspect of forming the team, and how you potentially find and evaluate an investment property.

Let’s transition to some common FAQs that you all hear from folks that are getting started in real estate investing. David, the first one here is, “Can I only invest close to where I live? Don’t I need to see the house before I buy and drive by the house regularly?” this concept of investing in my backyard or perhaps, is there an opportunity to invest at a distance?

[0:20:11.5] DB: Yeah, it’s a great question, one that we hear often and it has come up quite a few times in the none to one course particularly when we are talking with pharmacists that live in really pricey markets where it just feels intimidating to try to buy in that area compared to for instance the Midwest where Nate and I live and where properties are much more affordable than something on one of the coast.

I think the short answer is you don’t have to invest where you live. It may be less intimidating to invest or to go through your first investment process close to you and that is something that I did personally. We bought a house that was very close that I drove past on my way to work and so it was just very simple to keep an eye on that and to feel that kind of sense of security until I started doing that and realized like really not bringing a lot of value to this.

When I walk a property compared to when a contractor or realtor walks a property, they see a lot more than I see. When I drive by that house, I’m like, “Well, it is still there, it hasn’t burned down” I mean, there’s not really a lot of value that I brought to that so we started overtime in an area about a 45-minute drive from where I live, which I know to a lot of people that’s a daily commute, right?

That is not super far but it’s the point where we’ll buy a house, there have been houses that I have not been inside or driven by because we just value that team so much and the team perspective that if the contractor has walked it, if the realtors walked it, if the property manager is on board, there’s again, just not a lot of value that I bring to that equation. Again, even though it is not far away, we’re investing in houses that are far enough away that we’re not going there and we’re not in that day to day aspect of the investing, which is really helpful when you work a full-time pharmacist job and you don’t want to be distracted by your real estate investing.

[0:22:04.2] NH: As someone that does both in state and out of state myself, I totally attest to that like the ones that are out of state are so nice because I don’t have to worry about them, and then the ones that are in-state, you end up doing what I did, which is spend pretty much my entire Saturday painting and demoing a basement this weekend, so you can fall into that trap pretty easily.

[0:22:21.4] TU: You beat me to it Nate, before we hit record you are talking about your time spent this weekend and I was just thinking about that in terms of being in your backyard. David, one of the stories that I remember you telling early, I can’t remember if it was snow removal or mowing the lawn but you had mentioned that itch. That hey, I drive by this property, I see it all the time and I maybe have a tendency to think like, “Ah maybe I don’t have to depend on the team. I could save a little bit of money if I just shoveled the snow myself” right?

Obviously as you build out a portfolio, as you have, and of course you’ve built out a team that has helped you but that risk, I guess if you call it that can be real when you see the property so often.

[0:22:56.2] DB: Oh absolutely, yeah. I have vivid terrible memories of like six in the morning standing there with a snow shovel because the house was halfway between where I live and where I work and I am like, “Oh, I could just do this real fast” and then my feet are soaking wet and freezing and all that kind of stuff, it’s like why did I just pay someone the five or ten dollars or whatever it would be to shovel this?

Why did I feel like that was a good use of my time at six in the morning? So yeah, with some of this stuff there is some healthy separation when you’re investing just far enough out that you aren’t tempted to go run and do these things yourself.

[0:23:30.3] TU: Nate, the second question here and David hit on this briefly but I want to come back to it is this idea of is it a good investment if the rent is more than the mortgage and what’s the potential trap in that and what are some things that folks could be looking for to help avoid that?

[0:23:44.9] NH: Yeah, I think this actually goes back to that spreadsheet we talked about was it is not just simple numbers of, “Okay, the rent is 1,500 and the mortgage is 1,200 so cool, I am cash flowing 300 bucks a month” like that is not actually how the math works, right? We need to figure out a lot of the other factors that go into it because this is again, it is truly a business. It is an investment and so it has to run itself and by that, I mean that the repairs take care of themselves.

In terms of cost, the capital expenditures, big things like a roof or a furnace that breaks, again, the investment should be paying for all of those, so when we run the math on what a good investment property is, it needs to pay for itself every single year, year in and year out and put money back in your pocket to be considered again, “a good investment property.” I think running those numbers is really important and not just looking at the simple things but truly diving into the details and even though it sounds complicated, you can do this in three minutes, right?

Running the back of the napkin math and then getting into the nitty-gritty details if everything checks out.

[0:24:40.1] DB: Yeah and we try to sneak into that spreadsheet a couple of things too like other rules of thumb that you can look at. For instance, you may expect that the overall rent about half of that rent may go to general expenses like your taxes, your insurance, your repairs, property management, some of those things and so again, if that rent starts looking pretty suspiciously close to the mortgage payment, I get nervous that that property is not going to create positive cash flow every month.

[0:25:09.1] TU: Next question David is, do I have to do major renovations to a property? I think that is one of the fears I know I had, I suspect many have is how handy do I have to be and obviously some of the financial things that can come to this as well. So talk to us through this question.

[0:25:24.9] DB: Yeah, it’s a great question because people that watch HGTV think that yeah, all of these investors that jump in and buy these houses, they spend hundreds of thousands of dollars on these extensive rehabs that take months and multiple crews and it just feels super intimidating. We bought a house late last year that already had a tenant in it. It had just been fixed up, it was a great house and we liked it for the simplicity of not having to do any kind of renovations to that property, so that’s definitely an option.

We’ve also bought houses where all we had to do was go in and do paint and flooring and for a few thousand dollars it was done. So you can do no renovations, you can do minimal renovations or if you want to, if you want to do a pretty extensive rehab, there is potentially more money to be made and you could argue it is a potentially better investment but it may take more time. If time is scarce in your pharmacy world, don’t feel like you have to do major renovations to a property to have a solid real estate investment.

[0:26:27.6] TU: Speaking of time Nate, you know I think one of the common questions that comes up is, do I have to work with a property manager? Could I save a little bit of money here and do this myself? Although recognizing that some time might be involved and invested here. Talk to us about that question of, do I have to work with a property manager?

[0:26:43.8] NH: Yeah and again, I’ll bring in my own experience to kind of speak to this. I manage our local properties myself and then the out of state ones, I absolutely push off to a property manager. I have a foot in both worlds and there are advantages and disadvantages to both. I like doing some of the property management here locally one, because of the cost savings but two, it helps me be a better manager of my property manager.

I know how I want things to operate. I am a very detail-oriented nerdy pharmacist, right? I know how I want it to run. I know what my expectations are and so I can put the same expectations on the property manager that I am hiring so it helps to do both but it is not for everybody. I think David and I talk to people all the time about individuals who quickly identify, “This is not for me” or “I always want to be have a hand in this, I want to be involved. I like talking to my tenants.”

It is across the spectrum, there is no wrong answer to this. I think a lot of it pans down to what do you want to do and how do you want to operate.

[0:27:35.0] DB: Yeah, even when it comes to the property manager I think one thing to consider is, what is your pharmacy job like? There are certain pharmacy jobs where you can be interrupted and take phone calls and manage things two minutes here, three minutes there and there is others where you just absolutely can’t and so for me, I didn’t want to be in a position where I had to take phone calls during the day, I wanted a property manager to create that separation but again, that’s not for everybody.

If you do want to be a little more hands-on, you want to see those things, you want to be able to manage a little more closely, that is not necessarily something that you need to do and you could potentially save money if you are willing to take on those property management tasks yourself.

[0:28:09.7] TU: David, last question I have here relates to financing. Nate and I recently did a home buying webinar. We also did a LinkedIn live session and it seems like one of the topics that has a lot of interest that relates to the pharmacist’s home loan products where there is either a low down payment or in some of the physician loan products are out there, a zero down payment.

So often, I think folks might be wondering as we translate that from primary residence to real estate investment properties, are there zero down or close to zero down payment options for investment properties or what does that look like?

[0:28:41.9] DB: The short answer is not really but kind of. So when it comes to real estate investing, if you are just going to go out and like I mentioned before, finding a property that already has a tenant in it that’s already fixed up, the lending options are mostly putting a pretty decent down payment, 20, 25% something like that down on a property like that. That is the most common type.

If you are trying to get into real estate investing with less money down, there are options that just take a little bit more creativity or finding a loan product that aren’t quite as common. What we did in our first rental is we bought a property that we thought would be a good rental someday and we moved into it and we lived there for a period and then when we were done with that property and we were ready to move on to another personal residence, we kept that original property.

So that is where if you’re buying a property to live in with a zero down payment or very low down payment mortgage, you can often times keep those properties as rentals when you move somewhere else. If you do zero down to move into it personally, two, three years later, you do zero down and move into something else and you retain that property, that can particular in the price of your market save you from that 20, 25% down payment that can feel kind of overwhelming to save up for, for a real estate investment standpoint.

[0:29:59.2] TU: Great stuff guys. We’ve covered a lot of ground in a short period of time and I would highly encourage folks if they aren’t yet tuning in to the YFP Real Estate Investing Podcast, each and every Saturday morning a new episode goes live, please make sure to do so. We’ll link to that in the shownotes, you can find it on Apple podcast or wherever you listen to your podcast.

Also, if you are not yet a part of the YFP Real Estate Investing Facebook group, we’ll link to that in the shownotes as well. A great opportunity to come together with a community of other pharmacists that are everywhere in the real estate investing journey from, “Hey, I wanting to learn more, I am thinking about it” to “I am actually pulling the trigger on the first property” to “I am beginning to build my real estate portfolio.”

David and Nate, thank you so much for taking time to come on the show, I really appreciate it.

[0:30:37.0] NH: Yeah, happy to be here.

[0:30:38.6] DB: Thanks so much.

[END OF INTERVIEW]

[0:30:40.0] TU: Before we wrap up today’s show, let’s hear an important message from our sponsor, Insuring Income. If you are in the market to add own occupation disability insurance, term life insurance or both, Insuring Income would love to be your resource. Insuring Income has relationships with all of the high quality disability insurance and life insurance carrier you should be considering and can help you design coverage to best protect you and your family.

Head over to Insuringincome.com/yourfinancialpharmacist or click on their link in the shownotes to request quotes, ask a question or start down your own path of learning more about this necessary protection.

[DISCLAIMER]

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 of 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 post and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analysis 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 241: The Top 5 Objections to Investing in Real Estate

Posted on by yfpadmin

The Top 5 Objections to Investing in Real Estate

David Bright and Nate Hedrick talk through five common objections to getting started in real estate investing.

Episode Summary

If you’re interested in learning more about real estate investing but have yet to take the first steps, today’s episode is for you. During today’s conversation, Tim Ulbrich speaks with David Bright and Nate Hedrick, hosts of the Your Financial Pharmacist Real Estate Investing Podcast, highlighting five of the most common objections and fears that pharmacists have when considering getting started in real estate investing. Nate and David further explain how they have overcome those common concerns about real estate investing. They dig into ways to overcome not having the time or expertise and ways to combat the potential to become overwhelmed with the commitment of owning additional properties. They talk through fears about the current state of the real estate market and when the right time to invest is. They also address feeling like investment goals may be too far out of reach and not knowing how to build a solid real estate investing team. David and Nate reveal why investing in real estate doesn’t have to demand too much of your time. They also share tips on how to learn from other pharmacist investors and share their experience of finding the right team to help you get the ball rolling and achieve those real estate investing goals.

Key Points From This Episode

An introduction to today’s guests, hosts of the YFP Real Estate Investing Podcast, David Bright and Nate Hedrick.
Addressing Objection number 1: I don’t have enough time!
Why hiring a property manager saves you money and saves you time.
The second common objection: not knowing where to get started.
What David’s strategy has been at the forefront of his plan.
Responding to the objection that managing just one property is already overwhelming.
Answering the objection that the market is volatile.
How there is no way to time the market and the best call is to make sure the numbers work no matter what.
David’s response to the objection that folks don’t know how to build a real estate team.
How connecting with a real estate agent can be the first step to putting together the team you need.
Why they launched the YFP Real Estate Concierge: to help you find investor-friendly agents.
Nate’s biggest takeaway from hosting the podcast: the interesting ways that pharmacists are investing.
What David has learned through hosting the podcast: getting out of his own head and into the community with others is critical.
What listeners can expect from the YFP Real Estate Investing Podcast going forward including the None to One Group Coaching program.

Highlights

“What got me over this hurdle personally was understanding that it didn’t have to be me to do all those things! I just had to make sure that there was someone that could do those things. There were people that could be hired to do them.” — David Bright, PharmD [0:03:18]

“I was trying to rent out a property, trying to be my own property manager, trying to do it all and I was unsuccessful at doing it, a property manager came in, had the place rented out super-fast, and was able to rent it out so much more per month.” — David Bright, PharmD [0:03:50]

“I think the trick is that no one has a crystal ball, there is no way to time the market and so waiting for it to do what you want just means that you end up waiting.” — Nate Hedrick, PharmD [0:16:24]

“My story started with finding a great real estate agent that was then able to introduce me to other people around that could be a great team.” — David Bright, PharmD [0:20:22]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

This week, I had a chance to welcome back on to the show, David Bright and Nate Hedrick, cohost of the YFP Real Estate Investing Podcast. During the interview, David, Nate, and I talked through five common objections to getting started in real estate investing. Now, if you’ve been interested in learning more about real estate investing and have yet to pull the trigger to take that first step, this episode is for you.

Some of my favorite moments from the show include hearing David and Nate talk about why investing in real estate doesn’t have to be a huge demand on your time, how to learn and benefit from other pharmacist investors without getting paralyzed by the comparison gain, and how to get the ball rolling with the team to support you and achieving your real estate investing goals.

Now, before we jump into the show, I recognize that many listeners may not be aware of what the team at YFP planning does in working one-on-one with more than 240 households in 40 plus states. YFP planning offers free only, high-touch financial planning that is customized for the pharmacy professional. If you’re interested in learning more about working one-on-one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com.

Whether or not YFP Planning’s financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom. Okay, let’s jump into my interview with David and Nate.

[INTERVIEW]

[0:01:35.6] TU: David and Nate, welcome back to the show.

[0:01:37.8] NH: Hey, thanks for having us.

[0:01:39.5] DB: Thank you.

[0:01:40.4] TU: You guys have been busy with the YFP Real Estate Investing Podcast and other happenings geared toward pharmacists on their real estate investing journey, we’re going to get an update from you guys on those efforts towards the end of the show but I want to jump right into today’s topic, which is some main objections to investing in real estate. I continue to hear from many pharmacists that are interested in exploring real estate investing further, many folks that say, “Hey, I want to get involved. I understand how this can help me achieve my long-term goals, diversify my investing plan but…” there are reasons, objections, things that are getting in the way of them moving from that step of learning to actually taking action with that first property so we’re going to talk through some of those common objections today on the show.

David, one of the most common things that I hear, I suspect you guys hear all the time, we’ll call this objection number one is, “I don’t want to unclog toilets at 2 AM” or if we broaden this out a little bit further, “Maybe I don’t have the time” and to some degree, the expertise to be in the weeds on actually overseeing and managing properties but I realize the potential that’s there as an investment and as I mentioned before, potentially diversifying my portfolio. Talk to us about this common objection and fear of really being in the weeds on these properties and the time that it can consume?

[0:03:01.7] DB: Yeah, it’s a super common objection and I think that it was one of the things that almost scared me off as well because I am not handy enough to handle most things in my own house, let alone to be responsible for another house if I’m the one that has to go out there and be handy with those things. For me, I think what got me over this hurdle personally was understanding that it didn’t have to be me to do all those things, that I just had to make sure that there was someone that could do those things and there were people that could be hired to do those things.

I know one of the things that we talked about, Tim, you and I back at YFP episode 167 of the podcast was that hiring a property manager was just huge for me, taking 95% of the work off my plate in that process. At that point, I was trying to rent out a property, trying to be my own property manager, trying to do it all and I was unsuccessful at doing it, a property manager came in, had the place rented out super-fast and was able to rent it out so much more per month than I thought was possible in that the property manager’s fee was entirely covered just in that spread of what I wasn’t even able to get.

Ended up saving me money and saving me time. It’s just one of the best decisions that I’ve made when it comes to real estate investing and then by doing that, the property manager handles any 2 AM toilet clog or the furnace is out or the roof is leaking or any of the really scary things like that no longer becomes my responsibility to take that call and to figure out what to do and again, that has just been a huge help.

[0:04:43.1] TU: Nate, I know you have property local to you and then you have property not local to you. I think that this gets into a little bit of maybe some of the value as well as challenges of more that distance real estate investing but you know, even as you look at your property local to you where maybe there’s that urge in temptation of, “Hey, I could just go take care of this, right? I don’t have to pay eight, nine or 10%” that option’s not even on the table, right? When you look at properties that are not near to you and that even forces the hand further in having a model that depends upon property management here we’re talking about but also just a larger system in place to manage your properties.

[0:05:20.5] NH: It’s been a really nice way for me to build a business and a portfolio because you’re right, it lets me see both perspectives and both sides. It’s funny, we’re actually in the middle of buying another property here locally and my challenge for myself and more importantly, my challenge from Christine is to not go over there and do stuff.

I can paint a room, I can change a light fixture, I can do some of the basic stuff that I know, if I hire it out, it’ll get done better and faster but it cost 200 bucks or it cost 500 bucks. The challenge for me is going to be to not do that stuff and I’ve shown myself with the – on estate investing that it can be done and it can be done profitably, you just have to set it up that way from the beginning.

I completely agree, this is a challenge I hear all the time or objection I hear all the time but you can do that as much or as little as you’d like to.

[0:06:09.9] TU: Yeah, I think it goes back to what are some of the goals that folks have around their potential portfolio into the future, how involved do they want to be and I think both of you have done a great job. I’m thinking of several webinars that you’ve done with pharmacists and certainly have talked about your own show as well of really building out your model and even the financial model and even the financial model too from jump street, account for property management fees, to account for some of these other things that realizing your time is valuable, right?

We have many busy pharmacy professionals that again, maybe have an interest in real estate but don’t want to be unclogging toilets at 2 AM. By the way, who came up with that saying, right? Because I feel like, that has been the reason probably why so many people have never gotten started and involved, the 2 AM toilet clogs, I’d be curious to know how often that actually even happens?

[0:06:56.0] NH: It never happened at my house, so I don’t know. Now I’m just jinxing myself though.

[0:06:59.6] TU: Yeah, tonight, right? It’s going to be a thing.

[0:07:01.2] DB: Exactly.

[0:07:02.0] TU: Nate, the second common objection I think about is, especially if someone’s able to get past the, “Hey, I could never be responsible for another home” or that 2 AM toilet clog issue is, “I just don’t know where to get started” right? It’s so overwhelming, there’s so many different options, even if I listen to the YFP Real Estate Investing Podcast, my gosh, there’s a ton of different ways to get going and I just don’t know where and how to get started. Talk to us through this.

[0:07:30.7] NH: Yeah, I mean, especially with all of the different promotions from individuals in the community right now between vacation rentals, long-term rentals, people that do college flipping or college housing, then there’s just general flipping like we see on TV or commercial properties and self-storage and house hacking, the list goes on and on, it’s just crazy and so to say, “I want to invest in real estate” and not have an idea of what that looks like, I completely understand how that’s overwhelming.

That’s why we really try to encourage on the podcast and I’ve talked to a lot of individuals where you just go for that lick and the least glamorous, most boring approach and that’s the long-term rental. And I am not saying this is a fit for everyone but it’s a really great way to just kind of get in there and try real estate investing and figure out how to set and forget it. Let the property manager handle it or build up your system to handle it and just let things kind of progress from there.

Now, again, that’ snot a fit for everybody but what I encourage you to do is to learn a little bit about each different option, see the pros and cons and then once you dial into one, just learn that, stick with it for a while before you start branching out because it’s super easy to try to evaluate everything and get completely lost in the weeds.

[0:08:42.1] TU: David, talk to us more about – for your individual, Nate alluded to this as well of the approach towards the long-term rentals, kind of the buy and hold strategy and that certainly is one of many different pathways that folks may go, you’ve been at this for a while, why has that strategy really been at the forefront of your plan?

[0:08:59.8] DB: Yeah, I think for us, one of these values that we had is that we didn’t want real estate investing to feel like it was taking over our world and became our everything and sucked every last minute out of every last corner of life. That made the long-term buy and hold with the property manager managing things with me not out there painting and doing whatever else, that made that a really good fit.

There’s certainly other things that are enticing like vacation rentals and self-storage and other things like that but it was just a much simpler start in the long-term rental space. I think, the other thing that’s nice about that though is that early on, when there was a little bit more time and sweat equity was something that we were able and willing to throw in there, earlier on, that was a great fit and I was able to go out and paint and do things and help that process move a little further forward but the long-term rentals have a disability for you to do some of that if and when you want to and then back off of that if and when you want to.

Just from lifestyle and all of that really helps that to be a fit for us and then to Nate’s point too, once you get started in that space and you start to get good at it, the second and the third and the fourth becomes so much easier for acquiring those rentals or whatever that is because it’s getting that first property that’s the hardest step.

[0:10:25.3] TU: That’s why I love it and we’ll come back to this here in a little while. I love what you guys are doing with the one-on-one coaching program, right? Because from my experience and I think certainly from your guys’ experience, working with other pharmacists, investors, many folks that, “Hey, this is top of mind but I just can’t get over some of the hurdles” some of these objections that we’re talking about here today. Obviously, once you start to align what strategy of real estate investing fits best with you individually as well as your financial plan, getting over that first hump and then obviously, building the confidence to continue to snowball further.

I think if you guys have done an awesome job on the show, kudos to you guys of really featuring pharmacists that are doing lots of different types of investing and I think that can help people get an idea of, “Yeah, I hadn’t thought about that” or some of the pros of this strategy and cons of that strategy as well which takes me to my third objection, David, which is I heard so and so on the YFP Real Estate Investing Podcast and that’s awesome for them but that feels so far out of reach of what I think I can do.

I heard Jarred or I heard the pharmacist investor talk about the portfolio that had been building and all of the processes and systems and teams that he has in place and I’m just trying to get started with my first one and it feels really overwhelming and maybe this whole real estate investing thing just isn’t for me, talk us through this common objection?

[0:11:44.9] DB: Yeah, there’s a real pro and con to hearing some of those major success stories because on one hand, we hope and one of the things that we say on all the podcast is we hope that we’re after some education and some inspiration for people to take that jump and to get into their first property or to try that on for size and see if it’s for them, if that’s what they want to do.

Then, yeah, when you hear some of these killer success stories of someone that made $100,000 on a flip or where they bought 20 houses in a year, something like that, those kind of things then start to get intimidating too and you start to think, “Well, I don’t know that I can make $100,000 in a flip, I’ve never flipped a house before” so that intimidation can set in.

I think you’re right, there’s something about backing off of that. Understanding that folks that share their beset win of every game that they’ve played on a podcast that isn’t necessarily reflective of their first deal, their average deal, their mediocre still win out there and so setting aside some of those comparison things can be helpful to make sure that it’s not delaying someone’s start.

[0:12:58.3] TU: Yeah, you’ve really got to hold this line, right? I remember several years ago, I started listening to the bigger pockets podcast which shout out to you know, the great content they have in the platform community built and I would feel the highs and lows of those emotions, right? You’d feel the high of the education, the examples of stories, it was like those lightbulbs going off of I had no idea about this or that opportunity and then right behind that would be the fear of my gosh, where do I start? That seems so overwhelming.

I think that’s where the community, that’s where the accountability, that’s where that focus on the first property can be so valuable and as you mentioned, David, some of the pros and cons that can come from certainly, sharing some of the stories from other individuals. Nate, real estate investing to David’s comment, we often see some of the glamorous things, there’s certainly lots of YouTube stars that are out there, right? that are doing this that can further worsen this. What’s your advice for how we hold this line?

[0:13:54.6] NH: Yeah, I think something to keep in perspective is just like what Dave was eluding to is that the norm is not to have a ton of these properties and really, one of the things we try to advocate forward during our podcast episodes is, you don’t have to leave pharmacy and just do real estate full-time, you don’t have to be a millionaire real estate investor.

If you look at just a couple of stats here for you from roofstock.com, 16.7 million properties in the United States are owned by mom-and-pop landlords with one or two properties each. Meaning, this is just somebody adding extra rental property in their portfolio, maybe too that they’re using that to supplement their long-term retirement plans, right? You’re buying a property, you’re doing that early in your 30s, maybe even in your 40s, you’re sticking a 30-year mortgage on that and then you’ve got a paid off property in retirement, right?

That’s kind of what a lot of people are doing actually. It’s not these huge takeovers of real estate portfolios. Don’t compare yourself to those people that are doing that if that’s not your goal. Really taking that into perspective and trying to reset that expectation can be helpful.

[0:14:58.6] TU: That’s a really good reminder and I’m glad you shared that stat, Nate because I think it does feel, that surprises me when I hear that number because it does feel through listening to podcasts, reading books, reading real estate blogs, it feels like that would be the minority, not the majority in terms of folks that only own one or two properties and have that long-term strategy in mind so that’s a good reminder, you know, I think of really taking a step back and what is truly the market out there of how folks are investing.

Nate, number four, objection number four, market’s red hot, you know this all too well as an agent and the work that you’re doing with clients in that capacity. “The market’s red hot and I’m worried about buying at the peak, you know what? Maybe I should just wait and kind of let this be a thing into the future.” Talk to us about really trying to invest in real estate and this issue of timing based on what’s going on in the market.

[0:15:48.8] NH: Yeah, it’s super tough. I mean, the real estate market is still up. I think I was just looking at stats the other day and it was something like 17% increase in home prices year over year already and that’s on top of what we saw in 2020. I mean, we are seeing huge, huge increases in home prices, things are still flying off the shelves in multiple markets around the country.

I just heard of an agent yesterday that there was a property listed on the market, it was by all accounts about falling down and it had five offers by the second afternoon of it being on the market, so it’s a tough time to jump in. I think the trick is that no one has a crystal ball, there is no way to time the market and so waiting for it to do what you want just means that you end up waiting.

I think the better play and again, we’re not trying to convince anybody to do anything either direction, is to make sure the numbers work no matter what. And if you can do that, it doesn’t matter what the market is doing, right? If it goes down but you’ve built in that cushion and that base, you’ll be fine. If it goes up, fantastic news. The goal is not to try to time the market, right? I don’t buy a property and think, “Oh man, if I buy this now, it will be in good shape but about in six months I’ll…” you know, no one can figure that out.

If you can go in and look at it from a very objective perspective and say, “The numbers work, the numbers work even if there is a small downturn and the numbers work even better if there is an upturn” then you just commit to it and go for it.

[0:17:13.5] TU: David, as someone has been at this for longer than a decade, you’d seen certainly the dips and where many folks were jumping in and buying properties that have obviously appreciated significantly and then you’re in the midst right now as an active investor trying to navigate this hot, hot market. Talk to us about it from your perspective.

[0:17:32.2] DB: Yeah, I think what’s wild about that is that, you know, we bought our first house as a live in flip a little more than a decade ago but we still have it really see, like we have a person who lived through a down market because it’s been that long, which then I think a lot of people are saying like that’s probably overdue and if you ask people that live through that 2006, ’07, ’08, they probably still feel those scars of where the market really turned.

I think that that’s a reality of investing in general is that you know, the stock market as an example has some average returns that are positive if you look at big enough ranges but at any given year, that’s not necessarily guaranteed. I think real estate is a little different still because it is not quite as liquid. It is not like I could just go into an app somewhere and sell some index funds and five minutes later it’s done, right?

You definitely can’t do that with a house, so I think if your goals are to buy that property and hold it for 20 or 30 years, that’s a much different conversation than if you want to buy a rental, I want to try for six months, I want to sell it particularly when you think about the cost of transacting real estate, so taxes, fees, realtor commissions, all those kind of things. I think there is definitely some downside that we all need to keep in mind if there are thoughts of a market decline.

I don’t know what anyone’s crystal is saying this week, you know, we may see that or we may not but one of the things that I keep thinking in this market is that saying that I have heard lately of when is the best time to buy a rental property 20 years ago. When is the second best time? Today, you know, if you really have that long-term perspective if owning rental property, if you are buying right today still, maybe a good time to do that.

[0:19:20.8] TU: That’s great stuff and the reason I brought this one forward is I think especially for folks that, you know, are feeling overwhelmed by some of the other objections we’ve already talked about, you know, looking at a market like we’re in right now can be an easy opt out, right? Like, “Well, there is all these things but also the market’s where it’s at, so I am just kind of hold off” and I think David, what you shared there is a good reminder of what’s the long-term horizon that we might have involved or in mind as we look at our investing goals and plan.

David, objection number five is, “I don’t know how to build a real estate team” so you know, what I am referring to here is often what I would hear other pharmacist investors or other investors at large talk about their experiences, you know, people talk about connections and relationships they have with realtors that are investor-friendly agents and contractors that they are comfortable working with and that they vetted.

Perhaps lawyers, relationships with lenders, right? They are a phone call away for many of these folks and for those that are just getting started, “I don’t know where to start and I don’t know necessarily how to build the team and to build these relationships.” Talk to us through that.

[0:20:21.7] DB: For me, my story started with finding a great real estate agent that was then able to introduce me to other people around that could be a great team and I know there is definitely that perspective out there where like, “I need to have three contractors and backup contractors and two lawyers” and all these people lined up before I even go walk a first house for the first time and I certainly understand particularly from the personality of the pharmacist that wants to dot all the I’s and cross all the T’s very carefully and very methodically.

I definitely get that and particularly, if you are taking on a really risky scenario like if you are jumping into a house with a major rehab need, I can definitely see some hesitation in that but for us, we found comfort in just buying a more standard house that didn’t really need a ton of work, not trying to get in over our heads on our first transaction and just finding a great realtor that could recommend great people and then from there, kind of learning that network too.

Talking with that contractor to meet other contractors, talking with the lender that our realtor introduced us to, to find even contractors from there. Networking with the local real estate investors association that we were then introduced to and meeting accountants and attorneys and other lenders and other contractors, other wholesalers and so just getting to know a bunch of people kind of methodically and jus that organic growth process rather than going out there and feeling like, “If I don’t have 20 people that I can call in a first name basis and text a really quick response, I can’t jump into any of these” but no, just starting off with who is that realtor that I know can help me build that team.

[0:22:07.8] TU: Yeah and this is one example why I’m so excited about what you guys have built in the Facebook group, the YFP Real Estate Investing Facebook group and the community at large focused and interested in this topic is we’re seeing a lot of, “Hey, I’m an investor in Buffalo and I see you’re a pharmacist investor there as well, would you happen to know so and so?” right? They can build those relationships through referrals.

You mentioned the value and power of networking and I think it becomes a lot more comfortable when I can connect with another pharmacist who has worked with somebody or another investor that I know and trust that has worked with somebody and built those relationships for those referrals. Nate, David mentioned a couple of times the value in starting with a good realtor who really could then help shepherd some of those other relationships. You wouldn’t happen to know one would you by any chance?

[0:22:51.9] NH: Hey, if you’re in Cleveland, Ohio, give me a call. No, really this is why we launched the YFP home buying concierge and then eventually, the real estate investor concierge where you can go and get an investor-friendly agent because we found so much value for everyone that we’ve talked to, that that’s where it all starts from. If you don’t know how to build a team, that’s okay.

Take one step forward and a lot of times that one step is a really good real estate agent because they are going to be that Rolodex of people that you need to tap into different avenues. Again, if you go to yftrealestate.com, you can tap on, find an investor-friendly agent, connect with me and we’ll actually get somebody local in your area and again, the cool thing about working with an agent is that especially if you are a buyer or an investor, there is no cost to doing it.

It is a free person basically to walk you through all the steps that you need to understand, give you access to the resources that you need and be someone that can give you some advice along the way. Again, really advocate for that, that’s exactly why we have the service available because that’s a really great starting point for a lot of people.

[0:23:54.3] TU: Yeah, we will link to that in the show notes for folks that want to connect with Nate to learn more and have some further discussion. I would highly recommend looking at that further. Those are five common objections that certainly are things that I thought about. I suspect many other pharmacists might be thinking about it, “I’m embarrassed to get started.” I want to shift gears here and talk about some of the takeaways that you guys have had now.

That your 40 plus episodes into the YFP Real Estate Investing Podcast, you have interviewed many pharmacists, investors, connected with others beyond that. I suspect there has been some positive takeaways not only for you guys individually but also in seeing some of the wins of that community and growth of this niche of pharmacists that are interested in real estate investing.

Nate, I’ll start with you, as you guys are now more than 40 episodes in back to April 2021 when the podcast started, what have been some of your takeaways from the podcast and the launch of some of the YFP Real Estate Investing initiatives?

[0:24:51.6] NH: Yeah, I think the biggest thing for me as I look back is all of the really interesting ways that pharmacists are doing this. I think when David and I started developing the concept of this podcast and what it was going to look like, I think in my head it was going to be a bunch of people coming on talking about their long-term rental they have down the street and it’s like their one piece of it but there are pharmacists doing things from commercial to mortgage lending to –

We’re going to have a little spoiler down the road, we’re going to have somebody on the podcast here a little bit who bought a motel and what that looked like. I mean, there is all these really cool stories of pharmacists doing things that I never would have expected and it’s just been so great talking to them and hearing their stories and how they got there because it is all a little bit different but all remarkably the same in terms of, “You know, I had this problem. I started looking into it and here’s how I solved it and here’s what my life looks like right now.”

That’s just been so fun for me to see how those people do that and connect with the community that shares one thing in common but ultimately shares much more than that.

[0:25:48.6] TU: David, what about for you?

[0:25:50.0] DB: One of the things that I’ve found is getting out of my own head and getting into community with others is just so critical whether that’s real estate investing or even all of our shared experience in pharmacy school. We probably all had that like walking in a group from class to class and things like that, finding people to study together and that just helps to kind of keep you grounded and keep you focused on what’s important.

There’s so much that I think can be overwhelming, whether it’s pharmacy school, whether it’s real estate investing, whatever you’re trying to learn and that community is helpful and not just a community of people that are interested in that topic but a community of people with some shared experiences, so it’s just been so fun to hear pharmacists on this podcast. Pharmacists, they’re all wired similarly in terms of personalities.

Pharmacists that all value their career that they have invested heavily in, where they aren’t really trying to quit their jobs to be full-time investors like I think is common in a lot of other channels out there but pharmacists that just want to reimagine what life could be if they had additional income streams or more diversified retirement plan. It just seemed that diversity of pharmacists and non-pharmacist guests as well has just been a lot of fun to see that community grow.

I think if I could sneak a second takeaway that I’ve had in there is that and I think we alluded to this earlier but there is no value statement on goals. I think we have seen some really unique goals the pharmacists have brought. I think that talking with Blake and Zach early on and how they’re buying house after house after house and in kind of a rapid speed as they are trying to grow something there is a very different experience than when Eric Geyer came on and talked about what he’s doing with real estate investing a small number of deals, something that he doesn’t have to spend a lot of time on.

It’s you know, having one rental house can be a great goal, two could be a great goal, a hundred could be a great goal that there’s not necessarily a value statement in one goal is good or a goal is bad but just seeing pharmacists set those goals and achieve those goals has just been a lot of fun and really inspiring.

[0:28:04.5] TU: Kudos to you guys for bringing those guests on, asking good questions, right? Which allows folks to really tell and share their story and some of the motivational why behind what they are doing and certainly recognition of the time that goes into doing those episodes, planning for those episodes and I certainly think it’s adding a ton of value to the YFP community at large, so thank you very much to you guys for that.

Nate, 2022, again, we’re 40 plus episodes in. Obviously, I feel like we’re just kind of scratching the surface to some of the opportunity and education in this area. What can we expect, what’s ahead for 2022 when it comes to the real estate investing podcast and some of those efforts for the community?

[0:28:43.4] NH: Yeah, I think we’ve got a lot planned and pretty excited about. I think the biggest thing on my mind right now is we’re about to launch is our one-on-one coaching program. If you have seen anything about this in the Facebook group or heard about it on a podcast, the goal here is basically to say, “How can we take our community who is right on that edge?” right?

They are pretty ready to buy a house, they just need that motivation to kind of get to the finish like or to answer a couple of questions and so how do we take them from none, no real estate investing at all to that first house and so we launched this coaching program as sort of a beta test with a small cohort of individuals. We just had our kind of final applications due and acceptances go out and really excited to see where that takes us.

If we can get everybody over that line and actually buying their first rental property that would be really fun to see.

[0:29:29.1] TU: I am really looking forward to hearing some of the output and I suspect some of the success stories that are going to come from that group not only going from none to one but perhaps even some of the future growth that will come for those individuals and I sense the motivation we’ll provide for the rest of the community as well. I really appreciate you guys and the efforts that you’ve provided.

As we wrap up here, I would point folks in a few directions. If you’re not yet listening to the YFP Real Estate Investing Podcast, I hope you will tune in each and every Saturday. Nate and David are bringing you new episodes and if you are not also yet a part of the YFP Real Estate Investing Facebook group, I hope you’ll take a moment to join that community and we will link to that and both of these in the show notes.

Finally, David and Nate put together a great guide just about a year ago as these initiatives were started, The Pharmacist’s Guide to Real Estate Investing, we have that available for download for free at yfprealestate.com. David and Nate, thank you guys so much for joining and looking forward to an awesome 2022.

[0:30:24.8] NH: Thanks Tim.

[0:30:25.7] DB: Thanks so much.

[END OF INTERVIEW]

[0:30:26.7] ANNOUNCER: 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 of 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 post and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analysis 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 209: Three Real Estate Investing Lessons Learned from Fellow Pharmacists

Posted on by yfpadmin

Three Real Estate Investing Lessons Learned from Fellow Pharmacists

On this episode, sponsored by Insuring Income, Nate Hedrick and David Bright discuss the growing interest in real estate investing among pharmacists, common barriers that pharmacists face that may prevent them from getting started, and three real estate investing lessons learned from fellow pharmacists who shared their stories and journeys on the YFP Real Estate Investing Podcast.

Summary

Cohosts of the YFP Real Estate Investing Podcast, Nate Hedrick and David Bright, return to the show, sharing some of the lessons they have already learned from their new podcast in the short time since its inception. Nate and David discuss three stories, in particular, lessons learned about real estate investing from those pharmacists featured on the show and running themes in the YFP Real Estate Investing Podcast that listeners will notice and can anticipate in the future.

As a guest on the YFP Real Estate Investing Podcast, in episode two, Jared Wonders shared his real estate investing story and how a foundation of financial strength enabled him to make investments by reducing financial risk. In episode three, Zac Hendricks and Blake Johnson provided insight on streamlining your real estate investing and rehab process for investment properties. Blake and Zac further highlight the power of partnerships and networking, leveraging their network to help turn difficult situations around and grow exponentially as investors. The third pharmacist investor story shared was from episode five, featuring Jenny and Myke White. Jenny and Myke’s journey demonstrates the power behind education in real estate, but equally important to learning is taking the leap and buying your first property. The jump from none to one can be intimidating, but having a great team around you will help reduce risks.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Nate and David, welcome to the show.

Nate Hedrick: Thanks. Great to be here.

David Bright: Hey, thanks.

Tim Ulbrich: Well I appreciate you guys taking time. I know you’ve been busy with your own show, with the YFP Real Estate Investing podcast. And really excited about the momentum that we have there and an opportunity here to talk about some of the lessons that I have heard as a listener of that show, some of the lessons that we’re hearing from fellow pharmacists around real estate investing and hopeful that some of these items we talk about tonight will be things that folks can take away, whether they’re thinking about investing, just getting started, or looking to continue to build out their portfolio. So I know that you’re just a handful of episodes into the YFP Real Estate Investing podcast, but very excited to see the interest from folks that we have in the community, activity that we have in the YFP Real Estate Investing Facebook group, and it’s really affirming of the initial thought that we had of the thirst that is out there for pharmacists to learn more about this topic. So Nate, why do you think we are seeing that growing interest among pharmacists that are interested in real estate investing?

Nate Hedrick: Yeah, it’s a great question. I think it’s probably a couple different things. One is probably just an awareness bias. Right? Like we are interested in, and so now all of a sudden more people are coming out of the woodwork. And I find that that’s the case because I’m talking to people that are 28, 29 units deep and they’ve been doing it for 10 years and it’s not like I thought of it first and just found them. They’ve clearly been doing this a lot longer. So I think some of it is that. The other thing is that I think as pharmacists start to get their feet under them financially, they get their student loans kind of in a good spot, they get a really steady job, really steady income, they start to pay down some of that bad debt, they start to look at well, what are my other opportunities for growing my finances and building wealth? And a lot of them are starting to turn to real estate as a great opportunity to do that. And so I think that’s part of where we’re seeing that community kind of flexing from.

Tim Ulbrich: It’s interesting to think of, you know, the time that you guys launched this podcast, so you know, mid-April, arguably we’re in one of the wildest real estate markets that many of us have seen, at least in our recent memory. And so not necessarily the easiest time to jump into real estate investing. And so the fact that we continue to see pharmacists that are active in their investing, pharmacists that are wanting to just get started or even use this season as an opportunity just to learn more, right, and absorb information and perhaps act when the time is right for them and their personal plan. David, with that in mind, you know, in terms of the interest that we’re seeing, growing interest among pharmacists, there are certainly barriers that pharmacists are facing as well that might be preventing them from getting started. One of them I mentioned might be the market right now. What else comes to mind for you?

David Bright: Yeah, I think the market is an interesting one because we haven’t talked about that as much on the podcast, but I know it’s certainly come up on the Facebook group. And I think that’s kind of a head-scratcher for a lot of people because you could look to almost any season and say, if you were to think back to like 2004-2005, ‘Oh, the market’s rising really fast. I don’t know if this is a good time.’ You could look at it in like 2010 and say, ‘The market just crashed. I don’t know if this is a good time.’ Like you could be suspicious of just about any market, and so I think that some of that is just market hesitation. Part of that is just kind of getting through that and knowing that you can never really time the market just like with stock market investing. So I think that timing is one factor that causes a lot of heartburn. I think another one is just time in general to learn about real estate investing, to feel like you’ve got enough confidence, particularly for pharmacists that spend a ton of time in school and a ton of time learning about our trade. And as we get good at what we do, it almost feels like you’ve got to put that much time into real estate investing to know what to do. But I think we’ve had a lot of guests on that have showed that you can get started a lot faster than that. It’s maybe not quite that complicated. And I’d say money or at least a plan with money is another barrier as people are looking at trying to save up for a down payment or something like that with a house, that does take a plan, and it does take some effort. And then once you’ve worked to save up that money, that can also cause some hesitation. So there’s a lot of these common hesitation pieces, but one of the things that I really enjoyed about the first few episodes is we got a chance to talk with several investors who were a little bit newer and all had taken that plunge, and so that was really, really fun to see folks that had just said, ‘You know what, I’m going to figure it out, and I’m going to dive in.’

Tim Ulbrich: Yeah, and I think that Nate and David, both of you have I think taught me this either directly or indirectly. But so much of this feels like momentum, momentum to get started. And one of the things I’ve heard among the guests was the importance of that first move, right? And we’re going to talk more about that as we highlight one of the episodes here in a moment. But I think one of the things I love about what you guys have done with this show as well as what we’re seeing in the YFP Real Estate Investing Facebook group is really holding true to the mission that you guys had for the show, which is pharmacist first, real estate investing second to that and making sure that we’re able to develop a plan around the careers that we love and around the careers that we invested a lot of time and money to do and obviously to be able to serve the patients that they serve as pharmacists. And I think the stories that you’ve featured — and we’ll talk about a couple of them here on this episode — of pharmacists that aren’t necessarily way off in the distance of massive portfolios but that took that first step or maybe that second step, and it wasn’t all perfect, and there was some learning and some growth and some development, and I think that makes it relatable. Right? That makes it to me as a pharmacist listening that is saying, ‘You know, I’m interested in this,’ to Nate’s point, ‘I’ve tidied up certain parts of my financial plan. I may be ready to dabble in this thing of real estate that really excites me for a variety of reasons.’ And hearing other pharmacists that I can see myself in their shoes and really see myself in their position where yeah, there’s some excitement, but there’s also some anxiety and some fear and some unknown. But at the end of the day, there’s a lot of learning to be had through the process. So kudos to you guys for I think a great start to this show and really holding true to the mission that you guys set out before you even recorded Episode 01. So I want to spend our time on this episode really highlighting three lessons that I have heard come through the show from fellow pharmacists that have been guests. And you know, I shared with both of you guys before I hit record, we hit record, and I meant it, like I’ve become a fan of the show. And I’ve been listening, taking away some key points and information as I suspect many of our listeners have as well. And so I wanted to hit some of the main themes and key points and use some of the stories that we’ve heard thus far on the show to highlight those key points. First one I want to talk about here is Episode 02. And I had the opportunity to interview Jared Wonders on the YFP podcast, you had him on Episode 02 of the YFP Real Estate Investing podcast where he talked about long-term versus short-term rental property investing and his perspective. Nate, give us a quick summary of Jared, his story, what him and Jess are doing, as well as what you guys talked about on the show.

Nate Hedrick: Yeah, so Jared was our first true guest. And I thought he’d be a great target just because of the diversity of real estate that he’s involved in, right? He has a partner, and they own a multifamily together. He has a single-family that him and his wife bought by themselves. He just bought his first short-term rental. So like he’s dabbled in all these different areas that really highlight the various ways that you can get into real estate investing as a pharmacist. And so Jared is just a really great guy when it comes to explaining what’s going on, and he’s very eager to share that education with others. So he was a natural target for Episode 02 and just bringing on that first guest. He was great.

Tim Ulbrich: Yeah, and I really like what he shared, Nate, about — I had the chance to meet him and Jess when they were here in Columbus at a Buckeye football game and really could see the passion that they have for this topic and also their appreciation for the work that they do as pharmacists. But I think he said maybe three times on that show at least — I’d have to go back and listen — the importance of getting on the same page with your significant other or spouse, right? And I thought he did such a nice job of articulating that, and I know that’s something, Nate, that you’ve articulated as well, right? I mean, how important is that?

Nate Hedrick: Yeah, I mean, honestly, I never would have been able to pull the trigger on that first property without Kristen being on board and being able to talk through that. And still to this day, like we don’t do a deal without talking it through together. You know, I tend to be the overly excited one. I see a deal and I’m like, ‘Oh, we can totally make this work.’ And Kristen is the one that sits back and looks at the numbers and says, ‘Well, but hold on. The numbers don’t work and here’s why.’ So we need each other to balance each other out, and again, I agree. Jared talked a lot about how him and Jess do that together and how that makes them more successful, which is really cool.

Tim Ulbrich: The other thing I really appreciate about Jared — and I’ve had a chance to know him a little bit more on a personal level — is I feel like he very much has a passion and a heart for teaching others and helping others. And so that came through on the show, you know, in terms of his desire to help other pharmacists in this area and really appreciate the contributions he has made to the Facebook group and excited to see where his portfolio goes in the future. David, one of the things — when I listened to that episode, and I think you penned you guys right away, I also messaged Jared when I heard it because it resonated with me thinking about the financial plan and where this fits in — and this is our first lesson learned — is he talked I thought so profoundly about the importance of being able to make moves, speaking of real estate investing, from a position of financial strength. Tell us more about what he was trying to communicate there and why in your experience as well as what we heard from Jared, that is so important when it comes to real estate investing.

David Bright: Yeah, I think one of the things that we’ve seen in talking with a lot of different pharmacists, pharmacists are inherently wired to play it safe and in doing that, one of the best ways to invest with greater safety is to invest from a position of financial strength. And he talked a lot about that, how having cash reserves and having a plan for debt and all of that figured out just makes it so much less stressful so that when a water heater goes out or when there’s a roof leak or when there’s an eviction or when something happens, you handle it. You’ve got a plan in place. And doing that from a position of financial strength rather than I hope there’s margin left on the credit card or something like that. And so that can be really, really helpful and help particularly pharmacists sleep better at night in their investing. I think the other piece of that is investing from a position of financial strength, when you have your finances cleaned up and in order, pharmacists tend to have a much more solid W2 income, and that can be a real piece of strength for when you go to borrow money with a conventional lender for a mortgage. And so that can be a real just critical piece of purchasing property and having it go much, much more smoothly.

Tim Ulbrich: Yeah, and I know, David, our planning team here will be very happy to hear Jared’s advice and some of your comments here because one of the things I say on the show all the time is that every part of the financial plan has value and that it’s so important when you’re making a financial decision that you’re not making that decision in a silo, right? So here, we’re talking about investing as one part of the financial plan. We’ve got debt management, we’ve got insurance, we’ve got obviously a whole host of other parts of the financial plan. And within investing, we’re talking about one subset of investing, which is real estate investing. And I think that’s a theme I’ve heard from many guests and knowing the folks and their individual stories of you know, thinking about things like the emergency fund. Where is that at? What’s the game plan for that? What’s the debt position? You know, Nate, you and I talked about this recently on an episode related to buying a home with student loans is it doesn’t necessarily mean there is no debt. Obviously that’s an individual decision. But what’s the plan around that debt, right, in terms of being able to put this piece of the puzzle around that? And then the other thing I would add here that I heard loud and clear, guys, throughout all of the episodes we’ll speak about this evening as well as others is really having a purpose and a vision and a why for what you’re trying to accomplish when it comes to real estate investing. You know, what is the motivation? What’s the goal? Not necessarily because you heard a coworker or you heard it on the show and it sounds interesting. Hopefully it does. But what does that mean individually for you and your financial plan? And how does this ultimately fit into what you’re trying to accomplish with the rest of the financial plan? So that’s Lesson No. 1, which is really being able to make a move when it comes to real estate investing from a position of financial strength. And I think Jared did such a nice job with talking about that in Episode 02. Next one I want to move to is Episode 03, which was Blake Johnson and Zach Hendricks, two great guys. We’ve had them on the YFP podcast as well talking about some of their real estate investing journey. You guys did a nice job building upon that. They talked about in Episode 03 running the rental numbers and really digging deep into their individual roles and the partnership that they have. So David, give us a quick summary of Blake and Zach and their show. And what were some of the takeaways that you had being able to interview them for that show?
David Bright: I really had a great time talking with Blake and Zach that night. I know Nate and I ended up staying on after we turned off the record button, we stayed on to talk to them for awhile too. They were just a lot of fun to talk to. And you can tell that they are just, they’re just loving life as they’re doing this. This isn’t creating some major stress where they can’t sleep or anything like that. Like they’re just enjoying this. And so I thought that was just really encouraging to kick off with. But they talked about kind of how they get started, some different projects they’re working on, even with running the numbers, one of the things that impressed me so much as they were talking about running their numbers is they just have a really simple way of doing it. They’re doing advanced calculus pharmacokinetic kind of stuff. Like they just figured out some pretty simple math. And even when Nate and I threw some questions of thinking about it in a slightly more complex way, they’re like, nah. It was just the beauty of simplicity, and I feel like that can help get past that analysis paralysis. And they just had a really, really great model there. And I think the other thing that they hit on well is clearly, they have a partnership in doing this, which for their goals since you talked about that purpose and vision and why, for achieving their goals, they knew that they wanted to go bigger than just having one or two rental properties each. They wanted more than that. And so it just reminds me of that quote of, “If you want to go fast, go alone. But if you want to go far, go together,” how they just really found a great partnership opportunity and leveraged that in order to achieve their goals.

Tim Ulbrich: Yeah, and David, the other thing that stands out as you speak about partnership is how clearly defined their roles are. Right? So I remember Blake talking about really his value in being able to analyze the properties, find those that may be a good investment, and Zach really plays a significant role because of his background and what he does and a lot of the rehab, estimating those costs as well as overseeing that part of the project. So yeah, I think the value of their partnership stood out. I thought the clear purpose and vision and why behind their investing was a strength and certainly appreciate the comment you made on the value of that partnership. Nate, the other thing that I want to spend a few moments here on, which is the second lesson I want to talk about this evening that came out from this episode was the power of networking. And I remember Blake talking about this when we had him on the YFP podcast. He talked about it again on this show. It really seemed like they have been intentional in building relationships. Now, they’ve got a couple things going for them, right? They’re in a small town in Arkansas, Blake’s got some great relationships that are coming from his role of working with an independent pharmacy. But it seems like those relationships and the intentionality of building those and also conducting their business in a high integrity way that furthers those relationships really have played a big role in the success of their investing. Tell us more about the power of networking and what you took away from this episode related to that.

Nate Hedrick: Yeah, I agree. That’s a really powerful point for them that a lot of their deals, a lot of their — some of their best deals and some of their saves, things where it may not have been going right but they turned it around and kind of fixed it came because they had good networks and good individuals to speak with. You know, one of the main things they talked about was the first couple deals were MLS deals, meaning they were listed properties, anybody could see them. But as the market became tighter and tighter, they started finding new ways to find opportunities. And some of those simply became just because they knew somebody who knew somebody or they talked to the right person at the right time. And it just goes to show that truly building that network in advance and giving away things up front so that you can hopefully get back later in the future, it has really paid dividends for them. So again, they gave several examples on that episode, and I think again, like David said, after the fact we were chatting with them. It’s just incredible to hear the number of people that they interact with and how that helps their business.

Tim Ulbrich: Yeah, and I remember some of the relationships they talked about with agents, with obviously the lending and what that gave them in terms of they now have some of that smaller town relationship and being able to have some more flexibility and be nimble in some of those deals. David, I want to put you on the hot seat for a moment because this is one of the things I noticed when I started really getting into a little bit more about what you’re doing on the investing side of how valuable it was and is the team that you have built up around you. And I know this is a process that has taken time, but I think for somebody that is hearing whether it’s Blake and Zach’s episode or hearing stories such as yours or others that have really taken some time to build up these relationships, it can still feel overwhelming with like, where do I even start? Like is this a meetup of investors? Is this a Bigger Pockets type of thing or the YFP Real Estate Investing Facebook group? Like as you reflect back on your own journey where now you’ve got all these relationships with folks that you trust, that are looking out for you and your investing plan, like how did you get started with that? And what words of advice would you have for folks in this area of building up their team and then ultimately the power and value that comes from networking?

David Bright: Yeah, that’s such a good question because I agree, that’s a big thing that can get in people’s ways if I don’t have a trusted contractor, a trusted realtor, a trusted lender, like all these different people, that can be really stressful. For me, I know a lot of that started with a great referral to a great agent. And that agent knew great people who I was able to meet. From there, there was local networking with a meetup where I met more really good people. And so for me, it was a lot of just networking and trying to learn more from local people but all stemming out of some of those just natural first relationships.

Tim Ulbrich: So we’ve talked a little bit about being able to make moves from a position of financial strength. We’ve talked about the power of networking. And I want to shift gears now and focus on Jenny and Myke White, awesome episode, Episode 05 that you guys had them on the show, “None to One: How to Get Your First Investment Property.” And shoutout to Jenny and Myke, I’ve known Jenny for a couple years. I had a chance to interview Jenny and Myke on the YFP podcast. Love what they’re doing in terms of their investing but also love their passion for helping others and love their willingness to be honest with how they got started, some of the mistakes that they made along the way, some of the things that they’ve been learning along the way. And I think for those that are just beginning to think about what might be the first move, I would highly recommend you check out Episode 05 as I thought it gave a great insight into some fellow individuals that may be in a similar path to what you’re looking for. So Nate, give us a quick overview of Jenny and Myke, their background, what they’re doing from an investing standpoint, and how they got started that you featured on Episode 05.

Nate Hedrick: Yeah, what we realized early on, David and I just planning out some of the shows we wanted to have, we recognized that a lot of our audience is someone that has never invested in real estate before and may not have even thought about doing it up until this point. And so our thought was, you know, for both of us, one of the hardest things was getting that first property. And so how do you go from no properties at all to that very first one? And Jenny and Myke were in the perfect position to kind of share that because they had recently done it, and they have exactly one property. So they are about as relatable as you can possibly get while still being a real estate investor. And so Jenny and Myke’s story is amazing where they’ve really worked together as a couple to kind of figure out what is in their best interests. One of the things I love about their story is that Jenny talks about how it was kind of her idea first, this whole idea of real estate, and how she brought Myke along, which I think, again, a ton of people can resonate with where one spouse gets interested and then brings the other along for the ride and just how that worked and how they played that out. And again, I think overall, their story is about moving across country, relocating at where they were going to invest, and then leveraging their capital from that move into their first investment property and how that worked. It was a great story.

Tim Ulbrich: Yeah, I agree. And I love their passion, Nate, for learning. I know Jenny hosts a real estate book club on Facebook, and she talks so much about the learning process and for those that have ever met Jenny — and a shoutout to her — like she’s one of those people you talk to in a half hour or 60 minutes and you feel motivated and inspired to like get after learning more because she’s just so on fire with learning and also wanting to provide value to other folks and the conversations and the interactions that she’s having. David, to the point of learning, do your homework, this really stands out to me as the third lesson that I heard across multiple episodes, but really highlighting the interview with Jenny and Myke, and that is do your homework and learn, learn, learn, keep learning, but at some point, you’ve got to jump even if you don’t have all the answers. So talk to us about how important that is, when folks might decide when they’re ready to actually make that move, and how they ultimately avoid becoming paralyzed through the analysis phase.

David Bright: Yeah, I think that they had a really good balance there where Jenny in particular was doing a lot of that homework and learning and reading and all of that. Myke created a lot of accountability there in that coming on board together, kind of approaching this as a team. And then when it came time for them to jump, one of the things that they did that I really liked is they didn’t try for like crazy advanced strategies of they got a realtor, and they went on the MLS, and they found a listed property, and they bought it. And so they didn’t — by just jumping in with something that’s a tried-and-true method that you can read a lot about, you can learn a lot about, and it’s probably something very similar to what most everyone that owns their own home has already done. You find a good realtor, you go on the MLS, you find a house, you buy it. So jumping became easier because they had a strategy that helped for that. And by learning through that, that kind of decreased the anxiety and I just really liked how they were able to do that by surrounding themselves with a really solid team and a really solid strategy.

Tim Ulbrich: Yeah, again, that was Episode 05, “None to One: How to Get Your First Investment Property.” None to one, I love that concept, Nate. I think you mentioned it as well, but we should do more of those into the future. I think highlighting more folks because that is the biggest barrier, right? It was for me, I suspect for you guys as well and others that are listening. And maybe you go none to one and you realize it’s not for you. That’s OK. Likely you go none to one and you realize alright, I’m still on my feet, I learned some things, could have done it better, and what does that mean for the next deal going forward and also being able to help others. So “None to One: How to Get Your First Investment Property,” that was Episode 05 with Jenny and Myke White.

Nate Hedrick: And yeah, I would agree. The none to one story I feel like is the most authentic, right? Those people, they come on the show, they have just done this recently, and again, they’re the most relatable investor we can possibly provide. So I really like those stories. And you’re right, I’m hoping to bring more of those to light here with David as we go forward.

Tim Ulbrich: One other theme, David and Nate, that I’ve heard from guests throughout the episodes that you guys have done already is the value of community and learning from others, the value of community and learning from others. You know, that provides accountability, obviously it provides support, being challenged, making connections. We talked about several of these key points here tonight. And I think this is an opportunity for folks, if you’re not already in and aware of what we’re doing with the YFP Real Estate Investing Facebook group, I hope you’ll join us. We’ve got a few hundred pharmacists already that are engaging with one another, sharing some pretty awesome stories, the good, bad, and the ugly, connecting with other pharmacist investors in their community. That’s really what this is all about, hopefully that we can educate, inspire, empower, and ultimately be able to connect you with other investors that are pharmacists and also an opportunity to learn from one another. David, speaking of getting started, I think one of the challenges here is that folks that come on the podcast, even though you guys have done a nice job of asking them questions that may highlight some of the challenges along the way, we’re probably hearing some of the best of the best in terms of their deal stories or examples that they’re providing when you’re asking them to provide an example. And that might not be necessarily something that everyone listening looks at and say, ‘That worked out so well, I’m still nervous that it may not work out for me.’ So tell us about why that’s important folks consider that as they’re hearing guests come on the show.

David Bright: Yeah, I definitely want to caution when you hear things that are just like, ‘Oh, that was an amazing deal. I don’t know how I could ever do that,’ like I don’t want that to be this intimidating thing by featuring some folks where this worked out. Like it definitely doesn’t work out in every situation. Blake and Zach had a nice story that kind of showed some of the other side of that of how things don’t always work out but also how they were able to turn that around and still prevent it from being a disaster. Jared had a very similar story as well. So one of the things that when you have a good team around you, again, since pharmacists are so wired for safety, when you have that good team around you, they help you to not really get super hurt. And so you mentioned a minute ago this ‘none to one’ concept, and that’s one of the nice things about real estate is if you ever go from one back to none, it’s kind of like when you sell the house you live in. You go get a realtor, you put it on the MLS, you sell the house. So if you buy $100,000 rental property and after a few years it’s not really working out for you, hopefully if you’ve surrounded yourself with a good team and bought well, it’s not going to hurt so bad. It’s different than if you would have put $100,000 on Blockbuster 20 years ago or something like that. You could really be in trouble now. So there’s a lot of safety in team and in real estate in general.

Tim Ulbrich: Yeah, great reminder, David. And I know you and Nate have done a great job and will continue to of featuring the good, bad, and the ugly, right? I think it’s important as we talk about this as one option of investing that pharmacists may consider in the context of their financial plan, really understanding what is the benefits, potential benefits, what are the risks, who might this be for and who may this not be for and really trying to present a fair perspective on real estate investing. So Nate, I know we’re just a handful of episodes in, but am I itching as I suspect our listeners are as well, like what’s ahead? What should we expect from the show coming forward?

Nate Hedrick: Yeah, I think more of what we’ve already provided, right? I talked about sharing stories of people that are just getting started. We don’t want to move away from that because I think that is I think a lot of our audience. We’ve got some ideas coming away where we’re going to interview some members of those people’s teams. So property managers, contractors, maybe a real estate agent, financial planning, all the different pieces that go into supporting real estate investing. So taking some looks at that aspect. And then I think too, we’re just trying to share more stories of pharmacists doing this while being pharmacists. You know, that really was kind of the core mission that David and I looked at and making sure that our show was different and our show was relatable to specifically our audience. And so that is one of our big goals as we move forward is to keep sharing those stories of success as pharmacists but having that same success in the real estate side as well.

Tim Ulbrich: Yeah, and I hope you’ll join Nate and David each Saturday, new episode, what a better way to start the weekend, get a cup of coffee, put on the show. For those that are working weekends, you can listen to it on your car ride. Great opportunity to kick off the weekend. And if you have a question or story to share, feel free to reach out to [email protected]. We’d love to hear from you. Again, [email protected]. David and Nate, I’m going to put you guys a little bit on your own hot seat. So one of the things you do at the end of your episodes are some final infusion questions, which I love the pharmacy connection there. And a really cool opportunity to hear from folks about resources and things that are helpful among other things. Question I have for you guys — I do want to ask you for a resource or something that you’re finding value in right now — but first, I want to ask you, as you reflect on the journey thus far, you know, one of the things I share with folks is one of the greatest joys of doing this podcast has been able to meet so many different pharmacists and while I am helping to share their story, I feel like I leave each and every one of those learning something myself and hopefully finding an opportunity to improve. So as you reflect back on the journey thus far, David, we’ll start with you: One thing you’ve learned from the guests that have challenged or inspired you in your own real estate journey.

David Bright: Yeah, one of the things that has really hit me in the first several episodes that we’ve recorded is I’m realizing how most of my personal investing has really just been buy-and-hold investing, long-term rentals, kind of consistent and boring. And I like that because I’m able to do that without it interfering with my work as a pharmacist. One of the things that’s been inspiring to me is seeing pharmacists that leverage multiple strategies. Like I really thought I had to just do the one thing in order for it to be manageable. But seeing other pharmacists that are able to work multiple strategies at the same time and do short-term or medium-term rentals as well, and so it’s opened my brainstorming to maybe there’s other things that I could do, and if I follow in the footsteps of what some of these other investors have been doing, there’s got to be ways that I can also do that without distracting from my work as a pharmacist.

Tim Ulbrich: Very cool. And Nate, what about you?

Nate Hedrick: Yeah. To get really specific, I think it’s actually similar to David. I have not considered short-term rentals before as something that I wanted to get into. But after talking with both Jared and with Rachel, I thought immediately, like I’ve got to look into this more. This is something that I think is really interesting. You know, I’ve stayed at an Airbnb before, but I’ve never owned one. And so you know, again, taking that actual discussion and putting it into practice, right? Kristen and I within the last couple of weeks actually went out and looked at a property we were evaluating as a short-term rental. And that only happened because I had those conversations with Jared and with Rachel. And it was funny, an extra shoutout to Jared Wonders because I texted him the night before we were going to go look at a property, and I’m like, “Alright, man, I need to know everything about buying an STR like tonight.” And he was super helpful. He was like, “OK, well, what do you actually need?” And so he’s giving me all these great resources right over phone. So it’s just really cool to expand what I thought was possible and then have a community to go along with me for the ride. So again, it’s not like I have to go re-learn all this stuff from scratch. I can go right to people that are doing it, living it, and have a great relationship with me already and tap right into them, which is awesome.

Tim Ulbrich: And what a cool example there, Nate, right? I mean, that’s a great example of like going from textbook to application, right? I mean, you talk about short-term rentals, but you actually go out, you look at one, you run some numbers, you talk with somebody else about it, get another opinion. Like that makes it come alive, you know? So I think that’s a cool example of the value of making those connections. Another final infusion question you guys ask to your audience is, you know, what’s one resource, could be a podcast, could be a book, could be a guide, a quiz, a calculator, a form, whatever, that you’re currently drawing value from when it comes to your own journey as a real estate investor. So David?

David Bright: So one of the things that I think we keep making jokes about on the podcast because every week, at least once, “Rich Dad Poor Dad” gets mentioned, right, like if not multiple times. Like I don’t know, that book has changed so many people’s lives. And so kind of going through this, asking these questions and hearing that perpetually come up has actually caused my wife Heather and I to go back through that book —

Tim Ulbrich: Oh, cool.

David Bright: — as the two of us to just kind of talk through some of that, the fundamentals and foundations and mindset from that book because it is so good, and there’s a reason why everybody mentions it. So it’s one of those where I think you can go back and read it for the 13th time or whatever time you’re on, and some of that is just really helpful to continually get your mind in gear for where you’re trying to go.

Tim Ulbrich: Yeah, David, I think that’s one of those books — I haven’t read it 13 times yet, I think I’m only three times through — but it’s one of those books that hits you in a different place like where you are, you know, partly in probably your own personal investing journey mindset-wise. But I kind of have put that among some other books of like I need to revisit this book every couple years because it is that transformational. And I would even argue for those that are listening that are like, I’m not even sure the whole real estate investing thing is for me, I think it’s still that important of a resource just to get you thinking a little bit different in terms of mindset and money. Nate, what about you?

Nate Hedrick: Yeah, the resource that I keep going back to — and I’m stealing from my first answer — is the other pharmacists that we get to talk with, right?

Tim Ulbrich: Yeah.

Nate Hedrick: It starts with David and I, like David has been a fantastic resource for me, but also the other pharmacists that we’re talking to. And just being able to tap into that network, learning from people that are doing this, you know, I’ve always had some sort of community with Bigger Pockets and with my real estate activities, there are other agents I can talk to, but it hasn’t felt like this level of fit where I can just go to those people and we immediately connect and it’s on a different level than I’ve had before. So that for me has been a big change, and it’s a resource that I am fully tapping into. So apologies to all those I’ve already texted and bothered with questions, but it’s a great way to learn and again, we come at this as experts in what we do. But there are so many things that we are not experts in yet, and there are so many ways that I can still learn. And so this has been really fun for me to tap into that and continue to grow and learn.

Tim Ulbrich: Yeah, and the power of networking, right? We talked about it earlier on the show, but I believe that this is another great example, what you just said there, Nate, that there’s enough of this to go around, right, for folks that want to get — this is about other people helping each other, whether that’s in your own community, whether it’s in other communities, and we’re just a handful of episodes in, but I’m starting to see come to shape this concept of pharmacists connecting with other pharmacists in a variety of different ways, being able to encourage and motivate each other on their own journey and perhaps collaborate in some cases if that makes sense. So again, YFP Real Estate Investing podcast, each and every Saturday on this channel. If you have a question that you have for Nate and David or a story to share, please shoot us an email at [email protected]. And for those that are listening and thinking, where do I get started with real estate investing, Nate and David have written a great resource, “The Pharmacist’s Guide to Real Estate Investing.” It’s a quick read, a lot of tangible takeaways. You can get a copy of that for free at YFPRealEstate.com. Again, that’s “The Pharmacist’s Guide to Real Estate Investing.” You can grab a copy for free at YFPRealEstate.com. David and Nate, thank you so much for the contributions on the show as well as taking time this evening.

Nate Hedrick: Thanks, Tim.

David Bright: Thanks so much.

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