Join us in our latest episode as Yale Fowler, a former professional baseball player, shares his transformative journey into the realms of finance and real estate. After hanging up his baseball mitt, Yale ventured into the mortgage business, navigating the ups and downs of the financial sector with the same tenacity he brought to the baseball field.🔑 In This Episode:Yale’s transition from sports to owning a successful restaurant franchise and then to finance.Deep dive into the risks and rewards of the financial markets and real estate investments.Insights into conservative vs. aggressive investment strategies and finding the right balance for financial success.The importance of risk management, understanding the real estate market, and leveraging your investments for long-term gains.💡 Key Takeaways:Strategies for managing debt and the significance of liquid assets in financial planning.The role of real estate in achieving financial stability and how to make informed investment choices.Discussion on economic variables, interest rates, and the impact of inflation on investments.
Yale Fowler (00:00.214)
I’ve only done like 200, so I guess I have the advantage. Welcome everyone to Residing in North Idaho. We are a community podcast for North Idaho and all of its amazing residents. And I have a special guest today. I’ve got my friend, Yelp Fowler with Expert Home Lending. He’s like the man on investing and loans and all of the smart stuff that I don’t understand. So I brought him on and we are gonna have a good conversation.
He’s got some good notes and yeah, let’s dive right in. Also, before I forget, if you don’t want to see my face, you can also just listen to us on Spotify, Apple, iTunes. We are all, we are on all of those podcast platforms as well. So look for us there if you don’t want to watch the video. All right, let’s jump in. Dio, thank you for coming today. I appreciate it. Pleasure. Your background is interesting, right? Cause you did some baseball.
Yeah, that was I mean, I was that kid who grew up with a baseball in his hand. Yeah, you know, I have pictures of being nine, 10 years of age with a Dodgers helmet on, you know, when I’m sleeping. Yeah, and a bat in my hand, you know, it’s just the second I picked up a baseball, I just knew that that’s, you know, what I wanted to do. Yeah. How far did you take it in that sport? Ultimately, I ended up in the Dodgers organization as an outfielder.
So, you know, I just, I remember being a kid watching the Yankees and the Dodgers, you know, in the world series and just thinking to myself, that’s what I want to do. That’s who I’m going to be. And that was it. That was my 100% focus all the way through, you know, high school, through college. And then the Dodgers drafted me out of college. Where’d you go to college? Cal State San Bernardino.
Did, what was your major? Anything related to what you do now? Okay, okay. Yeah, but I actually left after four years because they signed me. So I had either the choice of going to play professional baseball or staying in school. So I opted for the baseball. What year was that roughly? 89, 90, right around the oral Hersheiser, Kirk Gibson years, if you remember that. I was nine, so I’m sorry.
Yale Fowler (02:20.042)
Oh, not much of a sports guy, admittedly either. So, but it was a great experience. I mean, I, I think it prepared me for, you know, everything else in life. My, my, or I should say my approach towards everything because, you know, when you’re, when you’re competing in a sport and anybody that’s been an athlete for an extended period of time, you know, you just, there’s so many great aspects. That’s why I love athletics for kids, you know, because you’re talking about
your drive, your dedication, delayed gratification, I think is probably one of the greatest attributes that you can develop, not, you know, this society has become everything about right now. Yeah. You know, and so just that time it took to develop, that seems to be the way that I ended up approaching everything else in business. Right. So how many years did you play pro ball?
Just a couple of years. Yeah. I was in college. I was all American. I tore the cover off the ball in college at like 460. And then I signed. But once you get to the professional level, very, very difficult. And I signed behind some big money. And that often can become difficult to break into the lineup consistently. And
And after a couple of years, I had some problems with my feet. I hung it up, but it was a great experience. What’s like the income, if you don’t mind me asking, um, like I know nothing about, I know there’s guys that get paid, you know, lots of millions. What about the guys that don’t get paid lots of millions? Like what’s the income on that? Well, when I signed, it’s been a while. I haven’t thought about that for a long time, but usually you make your money on your signing bonus and then you don’t make hardly anything.
Okay. And then you get to the majors and if you, you know, end up playing
Yale Fowler (04:19.446)
Several years, you know, you get a good really good contract. That’s that’s usually your first big contract comes after proving yourself I know a little bit in the majors. Okay, and the odds are unbelievably against you I think I don’t remember the exact statistics But I think it was like 4% of the minor leaguers actually make the major league Oh wow, and then of that the amount of people that stay several years, you know become a free agent is astronomically low so
the people that earn that income, they are, you know, the one in the, you know, a thousand, 10,000, you know, that of the kids that start, you know, it’s a, it’s a pretty difficult road in any sport for that matter. Well, there you go, kids. You get a chance. Yes. And you know, as a kid, I used to sit in bed every night and just pray to God and ask that I could play for the Dodgers. Really? And so I run, you know, after all those years, you know, that it ended up being
call came from the Dodgers. Right, you achieve that dream, that’s wild. Yeah. And then, okay, so you get out of playing ball, do you immediately go into finance stuff? Yeah, I was just, you know, my father, greatest father in the world, but finances wasn’t, finances weren’t his, his love, he was a principal. We were middle class. Yep. And so it was, I just,
from being a kid, I just, finance and numbers seemed to really go with me. And so at the end of pro baseball, on the off season, I had some problems with my feet, as I mentioned, so I knew my end was coming. And so I went out, I signed a half a million dollar lease and borrowed money.
and built a restaurant franchise. So I was 24. I did not know this. I never worked a day in my life in the restaurant business. And I, I literally, uh, I ended professional baseball like on a Friday and Saturday in San Diego. You know, I came home, uh, my restaurant was open.
Yale Fowler (06:29.626)
and I just started working, you know, 60, 80 hours a week. Can you tell us the name of the brand? It was a deli. It was just a small chain called Submarina. Okay. And we ended up owning the store. I think it became the number two of the 50 stores, you know, in the chain. Nice. But it’s interesting how your path happens. Yeah. You know, for me, it really wasn’t about a deli. It was about finance. My favorite part of owning the restaurant is it…
it struggled at first and then it developed and developed and then became very successful. My favorite part was just talking with certain people. Right. They’d come in and a couple friends of mine that were dentists, we’d sit down and talk all the time about finances and it just, it became cashflow allowing me to start thinking about investing in, you know, the different world. And so I went through 14 years there. And then ultimately,
found my way into the mortgage business and I thought, wow, this is perfect for me. I love helping people and I love finances. Yeah. Okay. So you were 24 when you started that. Yeah. When I was 24, I was working as a bouncer at a bar. Yeah. Interesting route. Different route. Different route. I think your route was probably better. Okay. And then you did that for 14 years, like full time. That’s awesome.
Yeah, I think owning your own business and I didn’t realize this because I, you know, I’ve worked for the man for most of my life and it’s like, you know, being a cop, any job working for the government, right? You don’t commit a felony. You show up every day and you breathe. You don’t even have to be really functional and you’ll get a paycheck every month. And it’s like, okay, it’s pretty easy. I can do that. So, but you know, working for yourself, it’s like, that’s a whole nother animal. Yeah, it’s also more rewarding. I would say it’s more, it’s scarier.
you know, because you don’t have that safety net. It’s more rewarding though, because there’s no ceiling to what you can do. And, yeah, so I don’t know. It’s cool. It’s funny you say that because that’s, that’s one of the things I’m gonna adjust this a little bit. Okay, check this out. That’s right. First time I’ve ever been interviewed baseball. Really? Yeah. Oh, man. Wow. Monarch. Yeah. But you know, that’s one of the things I want to talk about was
Yale Fowler (08:50.242)
First, I’m not a CPA or financial advisor, so I’m just gonna share thoughts of my experience of being in the mortgage business. I got started in 2004 and just learning lessons, mistakes that I’ve made, good things that have happened to me, bad things, that if I can help somebody, great. Yeah. And in the mortgage business, I’ve just come across so many people.
And one of the things I’ve learned over time, I think that is really, really important is like what you’re talking about, which is simply, everybody should have some sort of, in my opinion, of an open-ended project because those smaller projects, you know, the time commitment to them is, it’s just as much is, is a bigger project. And so like, for instance, in finance, I love the world of real estate.
and investing in the financial markets. Because those are traits that, you know, are industries that if you become, you know, successful at that, it can really reward you. Whereas if you’re in a business, let’s just say it’s a small business.
most of them, the small businesses, you know, they’re primarily driven by ownership, they work a lot of hours, it’s very, very hard. You don’t have the finances to pay people really to buy you that security that you need. And so, but they’re usually limited in scope. Whereas if you get into other industries, like in the financial markets or real estate, some of the money that you can earn,
is just substantially higher and gives you such a great, so much more of an opportunity you know to do what we really want which is ultimately we want to be able to retire, want to have time for family or kids. You know we’re all in the same boat trying to get ahead in our with our you know finances and to be able to do good things with our money right. What do you think holds people back from that? Do you think it’s like just knowledge, fear?
Yale Fowler (10:55.298)
um time like what you know what’s the fear yeah i think it’s fear yeah i think one of the things that happens is um
People with regards to their finances, a lot of people, I think they’re too conservative. They hold on to that. And unfortunately, that’s also what limits their returns. It’s a dual-edged sword. And there’s a balance. You can’t be so much in risk that everything’s out there at risk all the time. Families need security. You need to have a certain consistent income. But…
even in the financial markets, they’ll always tell you, take a little piece of that investment and put it into something that has a little bit more risk that can produce a greater return. And that’s like with real estate.
and investment, those two worlds, they really can reward you handsomely and take years off of your work needed to retire or pay off your home or what have you. So if I was right now starting out and I was, you know, 20 years old, that would be the, I think the financial markets and learning about real estate would be the two things that I would start learning about immediately.
because ultimately they’re gonna provide for you most likely the greatest returns. Yeah, I mean those are like historically the most consistent return on your investment, right? Yeah. Yeah, I lately I’ve been, I stole this from, you know, drug dealers, this motto, but like, you only live once, YOLO, you’ll hear that? And I’ve actually been saying this a lot to myself lately of like, you know, you’re getting ready to make, and I’m not saying make bad decisions, right? That there’s a difference here, but you’re feeling that fear holding you back from something.
Yale Fowler (12:44.88)
something and then I’ll just tell myself, like, who cares? Yeah, I got one shot at this thing. Like, let’s go for it. Let’s do it and see what happens. Yeah. Don’t hold money too tight. Right. You can’t take it with when you die. And it’s like your kids, they’d rather have the experience now than get your money when you die. I would, I would hope. So yeah, that’s kind of been.
where I’m looking at it from is like, hey, you know what? Make that big move, like open that business, do that thing that’s been nagging at you because if you don’t, you’re gonna look back in 10 or 20 years and be like, ah man, that was my chance and now I can’t for whatever reason. You know, everybody, if you talk to anybody that’s been self-employed for 30 years, everybody has, or virtually everyone, has lost it all. They’ve gone through great times, they’ve gone through terrible times.
But I think for me, I had like 17 years of ups. And then the real estate crash finally took us down. I had a lot of exposure in real estate. I think in looking back, I can say, oh.
I should have had a better balance here. I should have had maybe less properties. And so the crash impacted me dramatically like 15 years ago. And I had a lot of other things that went through at the same time in my personal life. But that time period was extremely, extremely difficult. And at that point, a lot of people, they will…
see people that have a tremendous amount of success and they will, you know, they’ll look up to that person. And I think that’s great. There’s some people have incredible successful stories. But for me, what I when I learned the most was when I lost it. I think you learn a lot on the way up, but you learn three times as much on the way down. And I think specifically, it’s risk. Like one of the things that risk is, is it’s term on paper.
Yale Fowler (14:50.762)
you know, especially when you’re younger, you know, your, your mindset just has a huge capacity for risk, right? And then as we get older, it, we begin to get more and more conservative. But when you’re young, you can just, you can take that, that risk and you, you haven’t experienced the other side of the coin. And when you do, it’s really painful.
And that’s what teaches you, oh, okay, risk is not a term on paper. Risk means, hey, you could lose everything and it could be really painful. Yeah. So I think that’s why, you know, you’ll hear this comment all the time, which is most millionaires have lost everything. And I think the biggest thing is they lose everything.
But what they don’t lose is knowledge. And in fact, they have so much more after going through it. And I know for me, in that time period, like 15 years ago, when we had a really hard financial time period, for me, I felt like people looked at me as a failure when things change. And inside, I was thinking, man, I’m the smartest person in finances.
that I’ve ever been, even though I don’t have the net worth and everything else. But now I’ve seen both sides of the coin. I’ve seen what risk can do to you. And now I understand, oh, like going into this market, a decade later, the way that I have assets, real estate cash flow, the way that I’m balanced is different compared to that, compared to 15 years ago. And I don’t think I would have.
been in the same situation I am now, had I not actually gone through and really had a tough period. Yeah, can you give us any specifics on things that you’ve done differently? Is this just not leveraging yourself so much, or what are you doing to protect yourself now? Well, one of the things I’ve learned that just from looking at clients, clients that are really successful, I’ve really just broken it down into three pillars. Like I look at…
Yale Fowler (17:01.726)
you have your income, which is one pillar. You need income, obviously, and you need consistent income. You have to be able to pay your bills, but just as important, you need to be able to have extra money to save and invest. So that’s one pillar that without it, everything has a tendency to really fall apart, right? So that’s one thing that you have to get going consistent. The other is real estate, for me.
that this is something that’s not liquid, you know, but it has incredible potential for returns. And the third pillar would be your liquid investments. And so I think you need all three, especially a balance between liquid investments, having enough reserves when things go bad.
and in your real estate. If I’ve seen tons of clients over the years that all of their equities in real estate, and I think one of the biggest mistakes I’ve seen too is sometimes if there’s people that are, they’re not investors, they just, they have their own home, they wanna pay it off quickly, and that’s great. Everybody has their own path that they wanna take, right?
But I’ve also seen times where people get too aggressive, perhaps in their own personal finances of just paying off their house, and they go to a 15-year fix or a 10-year fix, and they elevate their monthly payment, and then something goes wrong, and they don’t have the cash in the bank.
You can trap yourself there. So I think it’s really important that, hey, if you’re taking that approach, great, but you need to save for a rainy day. That’s why financial advisors will typically tell you, you want six or 12 months reserves in the bank.
Yale Fowler (18:49.522)
And so you don’t want to be just trapped, especially in like real estate where it’s not necessarily liquid. And if the market turns against you, it can be really ugly. Right. Yeah. So just having that balance between your income, your other pillar of real estate and assets, liquid assets to be able to sustain a downturn.
is something that I think everybody really should keep that in mind when they’re investing. Liquid assets now is that just cash in the bank or is that you know like 457 also or would it would be a liquid asset? I personally I would look at it as savings, checkings, you know investments, stocks, anything that I can liquidate.
that if all of a sudden, what if you have a ton of equity in your home, you’re on a 10 or 15 year fix because you’re aggressively paying off your mortgage, but you’re throwing everything to that mortgage, and then you have some sort of a crisis. And usually they’re unforeseen, like car accident, or you have a real high paying job in an industry, the industry potentially changes, and now you need some of that equity in the home, but you don’t have the income.
on paper to qualify, you know, right now. Yeah. Because you’re disabled or something happens, you know, so I think that that’s really, you have to keep that in mind. Is it smart to pay off your house or is it better to keep that debt and use that money to something else? It’s interesting. Everybody has their own perspective. Okay. I don’t know that there’s a right and wrong, and I can see reasons why people, you know, they go down different roads.
For instance, I’ve seen a lot of clients over the years that they are really high income earning individuals and instead of paying off their home, they say, you know, I want to take the tax advantages of the interest expense and different things on my mortgage. And then when they retire and their income drops, then they pay it off because they don’t need the write off. And then I’ve also seen people take the opposite approach, which is, hey, you know,
Yale Fowler (20:55.454)
I’m going to accelerate that payoff as fast as I can. I’m going to own my own home outright, and then I’m just going to build money into investments. But I think there’s a blend. I just personally feel that it’s not a great idea. Well, I would want to make sure that if somebody is aggressively paying off their mortgage much faster than their requirement, just to make sure that you have enough reserves in the bank.
There’s also uses of equity too. If you, with regards to equity, what you have to understand that there’s an opportunity cost. And ultimately that’s one of the balances.
that you really have to take into account, which is, hey, if I use some of that equity and I put in something else that has the ability to be an appreciating asset, not a $100,000 car that goes down in value, but into other investments in the financial or real estate.
Can I produce a better rate of return on that? So it really, it’s people’s level of how conservative they are and really ultimately what are you trying to accomplish? Okay. Speaking of downturns, like do you watch the market, you understand mortgages like.
Any thoughts on where things are going right now or even, I know it’s not financial advice. We’ll put that out there for sure. But you know, it’s nice to get your opinion because you are in that world quite a bit. What are we looking at in the next year or two? I’m not even sure. I don’t think in my entire career, I don’t think I’ve ever seen a time where there is that much disagreement of where we’re headed. You can
Yale Fowler (22:55.778)
there’s such different sides of the coin. Last year, some of the smartest, quote, smartest people in the industry thought our interest rates would fall around 2% and would happen. They didn’t fall 2%, they actually went up. And these are some of the brightest minds, right? Completely off. And so people would love to see, I mean, typically in election years, you see rates fall and what have you.
we’re also facing a completely different battle right now of inflation and printing money like it’s going out of style. And if they do it again, you’re throwing a whole bunch of money into our economy by printing it.
And you got the same amount of goods and you know what happens? Inflation, right? And so now we have the situation where we have a battle with inflation. And if they continue to do the same thing, it creates, uh, it creates an even bigger problem. Not to mention our debt and so many other things. So I’m not sure the outlook, uh, there’s a lot of variables. You can make a case for why rates would go down. Typically when.
things get tougher and tougher. They, you know, long term, you know, rates have a tendency, you know, to fall. And, but at the same time, you have other long term rates don’t like inflation either, right? Yeah. So it’s a challenging time. Even just the perspective on the whole economy. I mean, the massive debt that we’re dealing with is a company or is a country, it’s a huge issue.
I used to believe that there were intelligent people, you know, in the government making these decisions, but it does not seem like that. I mean, right? Yeah. It seems obvious that if you keep printing money, we’re gonna have a problem. Yeah. But I suspect it’s going to happen. Yeah. But why? Yeah, yeah. Well, we have a…
Yale Fowler (25:00.406)
Just, I mean, we’re over $30 trillion in debt, right? Yeah. And the only way that we’re going to resolve that is if we take different measures than we have done before. I think the saddest thing is that in America, we have some of the most amazing, incredibly bright financial individuals. And yet, those resources somehow don’t get pulled into the decision makers.
Yeah, you know that are, you know, we can’t as an individual go out and charge on credit cards to an unlimited amount and then continue to open up credit card after credit card after credit card. There reaches a point where a bank will run your credit and say, hey, Seth, you’re a little bit too hammered here with your debt. So we’re not going to issue you anymore.
And so you’re gonna have to change the way that you’re, that you’re operating. You’re gonna have to cut back. You’re gonna have to spend less. You’re gonna have to start paying down that debt and be more responsible before we give you more credit. Right. You would you would hope that our country would take that same approach. You would hope. I mean, what happens? Like, what’s the breaking point for this kind of path that we’re on? Like, what does that even look like? Not good. Like hyperinflation? Really? Not good. Yeah. I mean, there’s
There’s people that understand this a million times better than I do, but hyperinflation sometimes allows you to pay off debt quicker. Historically if you look at what happens with the uses of currencies, ultimately they end, right? Historically they’ve continued to change. We’re facing, in my opinion, just…
a whole ton of huge issues right now, not just here, you know, in America, but around the world. The debt that the world has is just, it’s substantial right now. Yeah. And it definitely concerns me. You know, I look at that, I’m like, how do I plan for that? What do I do? I put money in, do I put money in savings or is it, you know, better used elsewhere? Yeah.
Yale Fowler (27:18.346)
you know, we’re seeing this in the real estate world with the interest rates. I mean, it is definitely changing people’s perspective. And we have a lot of buyers that are just kind of sitting on the sidelines, hoping and praying that the rates are going to go down. And I’ve been telling people they’re probably going to go down because that’s seems to be the way it should go. And now it’s like, oh, they’re actually back up a little bit. And like, you know, I don’t know. I know. Well,
As a society, we’ve become accustomed to super, super low interest rates. Right. During COVID, I had a client that I was talking to and she was between 80 and 90 years old and she was wanting to refinance and she was referred to me. And so in our conversation, we were talking about where rates run, what have you. And she said to me,
anything under 3% is good. You know, and so when you think about that, well, you know, she probably went through rates on mortgages of 18%, 17, 15, 13, 10, all the way down to 3%. And her comment to me was anything under 3% is good. And I’ll never forget that comment.
You know, because that literally showed you the expectations. And unfortunately, for a lot of the youth coming up right now, people in their 20s, that’s all they’ve known. Like, I think we’re just getting past the covid interest rates where a lot of young individuals, they started looking at homes in the race between two and a half and three percent.
And so when they jumped to seven, their mindset was like, hey, I’m just gonna wait for them to fall back down. That’s never happened in lending. We haven’t gone down that road. So to that, I think it’s taken a little while. There’s a lot of people, I think, that just sat on the sidelines for no other reason that they thought that the rates really were gonna get down to those numbers again, and they haven’t. And I think it’s very, very…
Yale Fowler (29:31.654)
unlikely for that to occur again. If it does, fantastic. You can have a great opportunity either refinance or tie up a long term mortgage. But I wouldn’t plan on it. Yeah. And so a more balanced approach with rates being a little bit higher is historically what’s happened. And that’s probably where we’re going to stay. Yeah. And now I mean, so you’ve got rates up here, buying power is way reduced. Yeah. The only thing I can, there’s two options, either people get paid more, which is not going to happen.
or home prices are going to have to come down to reflect so people can actually afford them. Yeah, that’s pretty much it. Right. Remember when the rates came up to about 8%? Put the breaks on average 30 year fixed. Put the breaks on hardcore. Yeah. I remember I told my team, I said, you know what? I feel like right now, not in three months, six months, 12 months, but right now we’re going to make a decision because 8%.
the when I tell people what their payments are, I would say like right now on average, anybody that came to me that wants to buy a home, their mindset and their thinking of where they think they’re going to be
is probably 30% lower than when I tell them the actual figure. Ooh. You know. So if you had, like, can you do rough math? If you had a $500,000 house at 3% versus 8%, what’s the? Oh, it’s a big $100,000 at 6%, I think, is around $600 a month.
you know, just so you can see how that multiplies with the hundreds of thousands of dollars, right? Yeah. And so it is a situation where now, even the last 24 months, if you said, well, where’s the average individual, you know, since the COVID rates, right? They’re struggling more.
Yale Fowler (31:23.134)
Yep, like we’re accumulating debt. I think the credit card debt is an all-time high. I saw right now. It’s crazy Yeah, okay So that’s just and not only that but look at the interest rates that they’re charging so not only people have More debt, but they also have higher interest rates That seems criminal to me because I feel like they’re really taking advantage of people and I don’t know if that’s just Irresponsible spending it could be a huge portion of that like
because of popular culture and we have to live this Instagram lifestyle if that’s really driving some of that credit card debt or if people are really needing that to survive. I don’t know. I don’t know if there’s data on that. Well, in the store, you talk about inflation and what our really day-to-day lives are really facing with inflation. Is it 2% or 3%? How much was a gallon of milk?
a year ago or two years ago. Is it 2% higher or do you think it’s higher? So a lot of people are, you know, you have to take into account everything, obviously with inflation, if you’re being honest, it’s food, it’s energies, all the things that we spend every single day is, is consumers. Every time I go to the grocery store, and I see how much it costs, the first
Yale Fowler (32:51.94)
right now is making it. And so I think a lot of that credit card debt, there’s always a certain amount of debt that is just foolish spending. And there’s also a lot of people, like I’ve been divorced for about 14 years. And so as a single person,
you know now an unmarried person I I’m always thinking about somebody there’s so many people in America that are single family earners there’s a mom or dad and they have kids and they’re out working they’re bringing home the bacon they’re finding up in a pan they’re just strapped and like in my case my children my son went down a really difficult road and you introduce different you know challenges.
and you’re really, you’re really strapped. And so to not have a dual income earning family in this, in the country right now, it’s really, really difficult for so many people. And if you look at the markets, the stock markets had incredible runs, right? Real estate’s really high. Uh, it’s, it’s really challenging. Uh, last night I was listening to, I can’t remember, it was some
podcast, but they were talking about the difficulty, how much more difficult it is for a first time home buyer to purchase now versus, you know, 10, 20 years ago. And it’s dramatically more difficult right now. I can’t imagine, you know, when I, I got into law enforcement in 2007 and I never, after 2008, I always made over a hundred thousand a year.
And we were fortunate, my wife stayed home while my kids were young and we were able to do that on a single income. But that’s making over $100,000 a year. And we were still check to check and we weren’t, we didn’t have super nice cars, we didn’t have a very expensive house, but to look at, okay, when I was a kid I would think like, oh, if I make 100 grand a year someday I’ll be rich. But in reality, no, you’re still check to check. So how are these people that are making $40,000 a year
Yale Fowler (35:02.506)
Like how the heck are they even doing it? And I wasn’t eating like, you know, organic grass-fed food back then. It was like the cheapest food we could find and still check to check. And it’s like, yeah. So I guess I can understand from that perspective how people may need to use credit cards just for, you know, daily living. Yeah, which is such a struggle too, because it’s just, you know.
you start using carrying balances in the debt that I mean, everybody’s seen Dave Ramsey, right? Yeah. And just about the importance of getting out of debt. And it is, it’s once you start down that road, it’s really hard. It’s that expression where people say, Hey, I’m so excited just to get back to zero. Yeah. There’s a lot of truth behind that. You know, you don’t realize that when you’re younger, but if you’ve carried debt for any substantial period of time,
it’s a monkey that’s on your back and you know it’s it just it eats you know instead of getting 20 percent or a 10 return on your money you’re paying 30 percent 20 percent in interest right it’s terrifying i you know honestly it’s probably by design right it’s now your these credit card companies are literally enslaving the citizens you know knowing they’re going to get in this trap that they can never get out of it’s horrible
Yeah. I guess, you know, educating and knowing as you know, younger people are coming into adulthood and getting into life. Like they need to know, like don’t ever even do whatever you have to do to avoid that. Yeah. Isn’t it sad when you think about it? I’ve always wanted to just be able to go into say like a high school and just have a class and talk about nothing but finances.
But they don’t, you know, they don’t. And so what happens, you know, you go to college and what do you do? You get bombarded with credit card offers. Oh yeah. I had a friend in college. Yeah. And I’ll never forget going to see her. I was in, you know, we were in the San Bernardino market and she took a job in San Diego and she was a great friend of mine in college and she went to work at like Nordstrom’s or one of the high end retail outlets and
Yale Fowler (37:17.374)
And so I came to see her, you know, and she was, we were, like said, one to two years out of school and she had accumulated already over $30,000, you know, on credit card spending. Uh, but it, that’s like in today’s dollars, 60 or $90,000. Right. Ouch. Uh, almost instantly. And, uh, you know, so, so many young kids, they start off, they’re excited. They get their first credit card, right.
and then they start carrying the balances. And then you just get like, I’ve been there when I was in college, I had a credit card that always had debt on it. And you’re just paying the minimum amount and still accruing more. And it’s like, you get used to paying that and you don’t really think about, or at least I didn’t, that, hey, I’m just like, I’m paying all of this interest. I’m wasting so much money. But what if we took those same kids, we explained,
how the interest on credit card works compounded and what have you, and they understand how negative that is, and we start talking about being more conservative and putting investing as a must with some of the dollars that you make, and you take it off the top, and you start talking about the returns.
that people can make down the road by letting your investments roll over and compound. It’s funny, as a society, we want everything right now. And so we’ll go out and we will leverage to no end to get to the things that we want. But if we took that same money and we invested 20 years down the road, we could pay for everything we wanted, all cash, no debt.
and still have a whole bunch of money left over because we have that compounding, we have those years of compounding interest, our investments rolling over, equity in real estate would have you long term. That could put us in a completely different financial situation.
Yale Fowler (39:20.074)
So I think it’s the biggest mistake we’re making as a country right now is we’re not educating kids in high school and at a younger, even younger level, starting to teach them about finances. Because ultimately, I think with regards to finances, we all have our interests, right? Some of us, like I’ve always had a passion for finance and investments. It’s just right down my road.
Um, other people don’t, you know, it could be art. It could be whatever, right? You know, people that just want to be hunters, you know, uh, full time, whatever it is, but ultimately.
we all face one issue which is we have to be able to manage our finances. And if it’s not something that you love, that’s fine. Look at, I think too many people take a negative approach towards finances. Why? Probably because they’re so stressed out financially that when they think about it, it just brings them down. I hate to say this. I’m not a conspiracy theorist. But the more I see things like this, the more I start to think, is this
just another way to control the population, right? And why on earth would they not teach this in school? If your goal as a school is to like create functional adults that can think for themselves and problem solve and be great citizens, then you would want to give them every skill possible that they would need to survive. So, and this should be very obvious. So if you’re not giving them that skill, it makes me think there’s an intentional reason that skill is not being given. And now, they go on the path. They go to college, they accrue.
um you know debt from college uh student loans and then they get all these credit card debt now it’s just like you’re you are literally enslaving them into the system um for life and that’s like frustrates the hell out of me so like my kids are not in public school and this is you know idaho public schools are good still but i doubt it’s taught up here even um but you know the private school that my kids go to focuses on life skills and things like this do come up
Yale Fowler (41:30.694)
and they’d be open to having someone come in and teach the kids about finances and that’s important. So, I hate to think like that, but it seems pretty potentially obvious to me when I think about it that maybe that’s the reason it’s on purpose. Well, you definitely get dependent upon a system. Yeah, right. No, there’s no truth. Right. I think there’s just absolute truth in the fact that we could take a 100% different approach.
that would be more productive than the route that we’re going. Not educating our kids is a huge mistake, like I said, because what usually happens is people get in their 20s and they spend, right? And then their 30s come around, and then they have kids. Yeah. And then you get in your late 40s, and you’re like, our 30s, and now you begin to start thinking like, wow, I better pretty soon I’ll be in my 40s and 50s.
And we start kicking in, start thinking about, you know, retirement, you know, but that money compounding is incredible over time. If you invest it. Yep. And the earlier you invest that
you know, the way it, it doubles and rolls over. It is just absolutely incredible. And if you’re starting at 40 or 50, which a lot of us are, then we’ve lost a lot of that time. So if you could teach, you know, kids now how to start becoming an investor in their twenties, uh, it would be, um, really, really worth it. And the thing is it’s so difficult right now.
because the cost of everything is so hard. And I don’t think there’s ever been a time more than right now where just whether you’re younger, you’re older, but is to actually have just a diversity in your assets because we have a lot of challenges and having money in different investments, I think is just.
Yale Fowler (43:37.426)
a really, really smart thing to do right now, not having all your money just sitting in a savings account, right? Or 100% real estate. It’s a great time to be diversified. Yeah, that makes sense, right? That shares the risk factor over over, spreads it out. Yeah. And if you are a kid, I shouldn’t say kid, if you’re a young adult,
or even anyone for that matter. Like I will take on at times debt because I’m reinvesting. But if you do take on debt, try to make it towards something that you’re doing it because it can produce a return. Investing into something that is appreciating or has not, there’s no guarantees of real estate or the financial markets going up. But over time, historically, if we look at the markets,
they have risen, right? So having debt to invest into real estate or the financial markets, stock markets, what have you, I understand why people do that, but what we do is we take on debt for things that are often consumables, are depreciating assets, cars, toys, remodels,
just all kinds of things, just daily spending, how many people spend just tons of money on food eating out all the time, right? So we’re taking on debt for something that doesn’t produce a return and then we have to pay it back with a really high interest rate as opposed to if you do have some debt and it’s going towards an appreciating asset, great, you can retire that debt and have money left over long term.
potentially with an appreciating asset. And so I think that road needs to be clearly distinguished.
Yale Fowler (45:31.978)
Because one of them is going to get you, has the potential to really produce great turns, the other just buries you. Yeah, we started 529s, it’s the college savings account for our kids when they were very little. They have a surprising amount of money in them now, which is great. And we told them, hey, that’s fine if you don’t go to college as long as you’re doing something. But that money is not going to go to buy you a cool car. Like if you want to buy…
a house or something. And so we’ve been like beating that into their heads for years and my son is pretty convinced on that. So I think that’s the route he’ll go. It’s like, hey, take that money, you know.
buy a duplex house hack it, you know, live in half rent out the other half or buy a small house and rent out the rooms to your friends like whatever, just get in the game because yeah, you know, it’s, it’s hard to do now for young people. Yeah, but man, if you can get in like early, and then, you know, over time, it’s gonna be phenomenal. Yeah, yeah. I remember buying my first home at 24. Yeah, nice. You know, I think that’s how old I was. I probably don’t have my
I was in business a couple years, so after baseball, and I think I got done when I was 24, so maybe 26, somewhere around, I think I had a couple years in business already. I can’t remember exactly. I think it was a couple years. So
But that was great. And I bought it, it was a condo, and I sold it. I got some of my primary residence, took some money off the table tax free, and then I ended up buying a different house. But.
Yale Fowler (47:10.966)
Buying, getting started early, I just think is a huge thing. And the sooner you can own a home, I think the better. Yeah, 100%. I mean, when my wife and I met, she bought her own house when she was 21. That’s awesome. Yeah, and she was a hairdresser at the time, so it was really impressive. That’s even more impressive. Right, so having that asset, that’s, you know.
That was a big draw for me as a young man. This girl’s got a house, that’s pretty responsible. So yeah, so I was pretty impressed with that and just I’m hoping to get my kids to go that same path. Because you know right now there’s several corporations in America that I think they own now over 300,000 homes combined. I’ve even seen a couple like previews of ads that say,
You know, why have home ownership when you can enjoy all, basically when you can enjoy all the benefits of home ownership without owning the home. Are these, what are the names of, is BlackRock one of them? I think I’ve seen one of their commercials. But see, to me, that’s the biggest thing. So if I’m somebody starting out, in my opinion, the first thing I wanna do is I wanna own a piece of real estate. Because ultimately,
You know, I deal with lots of seniors and is in the being in the mortgage business, you see where equities are, if they’re an assets liquid assets are if they’re in their home. Whereas almost everyone’s net worth it’s in the home. I mean, I see clients all the time that they have 510
$15,000 in the bank in their retirement age, but they have $400,000, $500,000 equity in their home. Okay. And they could potentially do a reverse mortgage, you know, on that. If they sold a liquidated, you have some potential tax free options there too, or at least of X amount of your equity. But that’s their biggest asset. If they needed to liquidate, they could have a substantial amount of savings.
Yale Fowler (49:26.95)
Saving is much harder in my opinion than earning appreciation on something over time. Yeah. And if you take that variable out, where you don’t take those same people that now they’re renters and they’re retired, and what happens to our earning power when we retire? It goes down. And what happens to rent? Rent keeps going up. So you’d have those same people now without
their earning power being reduced and rents dramatically more than what they used to be. And so not by taking an approach where, hey, I don’t need to own, you know, real estate, I’m just going to rent.
that can really work against you, especially if you’re not a great investor. I mean, ultimately, own your home outright is what we all want. Yeah, well, and the sad fact that I’m starting to become a believer that whenever the government or big corporations tell you to do something, you should do the exact opposite, because it’s probably not in your best interest. So if these big corporations are like, oh, you should totally rent from us, the bells and whistles go off in my head. I’m like, that’s probably not accurate. Yeah, no, I just…
I think, hey, if I’m starting out, I want to keep my debt as low as I can. And I want to be able to invest in real estate and buy a home and even become an investor. It
Just historically, like I said, as a loan officer, over 15 to 20 years of seeing clients and seeing where’s their net worth, ultimately, right, it’s our assets minus our liabilities, where’s our net worth? Virtually everyone, their highest net worth is by.
Yale Fowler (51:14.422)
buying real estate and holding it. And this is, I mean, you’ve had clients for that 20 years, so you can literally say you’ve seen the progress on what they’ve done. Yeah, yeah, yeah. And to give you an idea, like, I have one client, just some of my favorite all-time clients, he and his wife. But, you know, they have never been substantial income earners. I don’t know the exact numbers. I would guesstimate probably he never made more than
$60,000 in his on his are in his profession Maybe up to you know recently, you know or so but he was never a high income had a very solid stable income But owned multiple homes. That’s impressive and
and in a higher cost market over time, it’s become a higher cost market. His net worth is probably several million dollars of real estate, and this is somebody who’s never generated a six figure income and has raised a family, super, super hard worker, but he’s…
He’s just really investing. He’s always working on his properties, improving them. And he did one great thing. He held them. And what’s happened is the acquisition costs now are so, it was so small compared to today’s dollars. Rents have gone up dramatically and the homes have appreciated.
that now he’s just they’re super successful with regards to their overall net worth. And they did it with very, very little income and just being conservative. But the one thing that they did is they invested into assets that appreciated, right, they put their money into an appreciating asset and just held it.
Yale Fowler (53:09.778)
getting too expensive and is inflation messing that ratio up? Well, just think, when we talk about now about dollars and what they’re worth, my parents lived in Escondido, a suburb and I remember when, I think it was around 1973.
I believe that they purchased the land, like three quarters an acre, and built a home about a 2,800 square foot to 2,000 square foot home. They bought it and built it for a total of about $32,000. Whoa. You know, and so when it sold, it was probably worth a ballpark of $600,000, you know, give or take. But look at that return. But if you went out 30 years, 40 years.
50 years and you looked at today’s purchase prices of real estate, is it gonna be higher or lower? And the likelihood is it’ll probably be higher. The one thing that I can tell you that I’ve seen that is just a really, really common trait amongst some really, really successful people is that you look at where their money is going.
And the one thing that I see is they’ll have a mortgage, but they have interest expense, different deductions, benefits, right? So they’ve invested. They’ve taken out a loan to purchase a home, something that they feel is going to appreciate over time. And they don’t have any other debt, or they might have one car payment.
And some, like for instance, people in real estate, if you’re showing clients around properties, I can see why people wanna have a car that’s a nice car. But it’s all in perspective of how much are you earning is that car payment manageable, right? They’re usually conservative with that car payment.
Yale Fowler (55:20.622)
Okay, so it’s like they have a mortgage and maybe one can serve one smaller car payment. And that’s it.
They’ll use credit cards and take advantage of, you know, one or 2% cash back and everything else. But they’re paying them off in full every single month. They’re not, they’re not carrying the debt. That’s when I see people now, investors are a little bit different story because sometimes they create, they have more debt. If they have more properties, they have more mortgages, you know, potentially, or sometimes they’re taking on a certain amount of debt to improve properties. Or they’re investors and they want to take on some debt to
into something and then ultimately paid off, but they feel they can get a greater return. That changes, you know, the picture a little, but especially people that just have a primary residence, when I look at those people that are doing really well, they live conservatively, and they also have the mindset that they’re not doing enough. As opposed to…
clients when I talk to a lot of times when I talk to clients that are struggling more, they’re looking at the highest values of what they think their home is worth and what have you and the most successful people seem to have a different and they look at a more conservative approach. I think it’s a mindset, a mindset of being an investor saver is that hey, I need to save a little bit more. I need to sacrifice a little bit of my fun time to put some money.
in the bank. And that’s really, really common is to see that approach, even though they have the means to go out and spend a lot more, they invest, they save and invest. How does somebody get started investing that doesn’t know who’s the first person they should talk to? I think it’s great to have a mentor. Yeah.
Yale Fowler (57:19.73)
you know, my place in the mortgage business, I’ve never felt that my call was to be a top income earner. I mean, I had a prior company, I was in the top, I think 5%. But, but ultimately, it’s not what, you know, like, for me, it’s, it’s a balance. I love investments, I love helping people. And I spend a lot of time with my clients, I would say like,
For me, one of my greatest areas of benefit to a client would be helping that person who wants to get ahead.
What are the steps to take to become an investor? It takes time and energy You know to work with people but so I think Finding someone that will invest in you and that may be a family member for me is an example my father We never had one financial conversation that I can ever recall when he I don’t think he ever bought a stock He didn’t buy investment property We lived off of his income and it took everything
um everything we had to survive. Yeah you know I’ll never forget like 10 years after uh
going to Lake Powell every summer and doing things that my mom said, yeah, your father just paid off the loans that took you on all those vacations, right? And I’d be able to give you the shirt off of his back. So see, I didn’t have that within my own house, but I felt like I had the greatest day I’d ever, right? So you just, you reach out, find somebody who’s been there, done that, or going down that road, and I think it can really, really help you because…
Yale Fowler (59:01.614)
Somebody that has a little experience can go a long way in helping you get you started. And you know, your perspective when you’re young compared to as you go through and you go through those ups and the downs, right? It changes your perspective. And I think that’s really critical. So I’d start there. The other thing is just start thinking about where you’re putting your money. It is so easy. And you know, I have clients that make…
They’ve earned 20,000, $30,000 a month. They’re doing great, right? And they, they have virtually nothing to show for it. In America, you could make 20 or $30,000 a year or a month and live high on the hog and it could all be gone easily, even with that much money. So I, I think like.
People need to start thinking as an investor when they make a little bit of money. Because if you don’t learn how to save even just the smallest amount, when you’re making a little bit of money, what happens when you make more money?
it turns from a really low end car to BMW, or it’s a $400,000 house, but now you make more money, now you own a million dollar house. Right? It’s very easy for us. And I think what we as Americans do is we take up our spending with our income. We make more, we spend more. So that’s something that, you know,
No matter how tight we are financially, even if we’re struggling, most of us sooner or later go out to Starbucks, we go out to eat. There’s some money where even if it’s $10 or $50, just something, but start that established the principle of saving and investing in an early age. The other thing is you just… I really like to get people to think about…
Yale Fowler (01:00:59.874)
put your money in something that has the potential to grow as opposed to like cars. Okay. I have several clients that their car payments are 1400 to 1700 dollars. Damn. Yeah. Okay. So now that could be like a 300,000 dollar mortgage. Right.
So if you want to become an investor and you own your primary residence and you have some money and savings and Maybe money for down payment But you have really high a 1400 or 1600 car payment or you have installment loan because you bought you know, uh, a hundred thousand dollar boat, you know, whatever you have to understand that Short-term loans. They have a really high pay or high payment
And what that does to your debt-to-income ratios, if you’re trying to qualify for something, is it makes it really, really difficult. So if you have the mindset of, hey, I’m going to buy a home and I’m going to try to just keep my debt to a minimum, just my mortgage,
There’s lots of clients that I have, if I look at what their mortgage is, and I look at their monthly payments for revolving, installment loans, car payments, maybe a couple toys, their non-mortgage debt is as much as their mortgage debt. And so even though it’s not as much as the mortgage, it’s short-term payments. And it puts them in a position where financially,
not only can they can’t buy as nice as a home as they would they would want which at least is an appreciating asset but it really restricts them and completely takes them out of the investment market right so if you can keep your debt to where you’re just carrying you know a mortgage or something a very small conservative payment out that
Yale Fowler (01:03:01.318)
are outside of the mortgage at real small payment. It allows you to have more flexibility than if you want to go qualify for things. You’re just in a better financial position. Plus, you’re not paying all that interest to the banks. You know, credit cards are really, really high. We all hate to pay interest on credit card debt, and then they seem to keep going up. Right? Yeah. All of that is
it’s loss savings, it’s the opportunity cost. What could you be investing that into producing to return versus how much is it costing you just to carry that interest on debt? Right, what, for an investment property, interest rates are a little bit higher for that, right? It’s like a second home. Yeah. Like how much higher are they generally?
Ballpark 3 8s are a half a percent. Okay, so not like a full percent. Yeah, it used to be if somebody would ask you, hey, what’s a 30 year fix or what have you, it would be, you could kind of almost give a generic answer as a ballpark. Now, it’s not that way. Okay. Lending is completely changed. You have take conventional financing, you know, you have 620 to 640 is a FICO, 640 to 660, 660 to 680. And every 20 points up is a different pricing bracket combined with loan to value.
And some of the pricing adjustments are just absolutely crazy. So as an example, if you want to do a cash out loan with a 620 to 640 FICO, I’m…
80% loan to value. I think the pricing adjustments now are almost like five points in Fannie’s system right around that which is just Substantial it’s huge. Yeah, but if you’re a 780 FICO, it’s a and maybe 75% loan to value. It’s a fraction of that. So everything in lending Interest rate wise it’s loan to value. It’s FICO score occupancy but
Yale Fowler (01:05:04.274)
from person to person, especially in conventional, which is Fannie, you know, Freddie, typical conforming products, that it’s really can vary from person to person. The FHA and VA don’t as much. Okay. And then like how much of a down, is there for a second home, is it 20% down minimum or is there variations in that as well? So this is, I think, really important for a first time buyer to know and think about.
before or an investor, which is if you have an inclination right now and you’re 25 years old, 30 years old and your first time home buyer and you’re already thinking, you know what? I want to be a real estate investor. You need to think about that before you buy your first primary. I think it’s one of the biggest mistakes.
So if you think about this, there’s really two ways that people buy investment property. One is you purchase a home. How long is it before the average first time home buyer moves up? I think it’s five to seven years approximately, correct? So you buy a home, things are going well.
you hold onto it, you convert it to a rental, and you go buy another property. And you might buy that next property at 95% financing, or you have a little small down payment potentially because it’s a primary residence. So you don’t even have to have saved that much, but if you have enough for a smaller down payment, or you had a home equity line that you accessed for the purchase of a down payment, like let’s say five years ago, you did a HELOC on your primary residence, and it was for $100,000,
You don’t have anything on it, but now you want to go buy another property five years later, right? You have an established line of credit. So you can use equity from your home or you can do high percentage financing. Why? Because it’s a primary residence. Okay. So that’s one way. The other is to go the investor route, which is where you’re typically putting 25% down. You can go to 20 as well too, but the pricing is there’s pricing adjustments gets your interest rate gets worse.
Yale Fowler (01:07:21.838)
you know, so ideally and in most cases you’ll see investors put 25% down. Okay. Okay, so this is the reason why I say you have to think about this before you buy your first home is because I think it should impact the way that you’re what you’re buying. So if you’re a first-time home buyer and you’re buying a primary residence but you potentially
It’s a great idea to be conservative in that purchase. Sometimes we want the world as our first house, right? Oh yeah. Okay. So if you think about this, if you’re buying a primary residence and you know, chances are you’re going to move up. You might buy a condo, you know, or a smaller home is your first purchase. Maybe you get married, you have family kids, you want some more space, your earning power increases, you’re getting more into your seasoned in your career.
And so as your earning power goes up, people typically step up and buy another home. Okay, so if you’re thinking about that, sacrifice a little bit on your initial purchase. Why? Keep it a conservative purchase. Because if you do, and you get good financing on it, then that five or seven years later when you’re going to buy another property, if your mortgage is affordable enough, you
then you put a renter in there and you can make the numbers work. You’re not so negative in a cashflow. Yeah. Where I see most people that have to sell their first home is because they got a big mortgage on it. It’s an expensive property.
or it was a really a big stretch from the buy. And even years later, if they try to put a renter in there, they can’t cover the mortgage. They’re gonna be over or upside down too much. Right. Okay, so why is that so important? Because when you’re, like I said, two ways of buying a property really when you’re new, an investment property, which is one.
Yale Fowler (01:09:28.066)
buying a home, an initial home, keeping it conservative, having it have the ability to cash flow, hold onto it, and now go buy a new primary residence, and you’ve kept it. You might have done 97% financing or 96.5% financing on your initial purchase. So you didn’t need a ton of cash and equity to get into that home. And if you do that,
and you buy conservatively, then when you go to buy your next property, you can keep this one in the numbers work or will shortly. Okay. With rents increasing, the other option is you bought bigger. You experienced too much of a negative and you can’t really make that.
that work. And traditionally, when I see people keep properties are neat, are not keep their properties that they want to. The phone calls normally like, you know, I’m just tired of this property bleeding me. It’s very difficult to keep negative cash flow properties long term as an investor. Right. It just beats you up, especially when things go bad. Now you’re trying to cover your overhead and fix the roof or whatever negative, right? But
Yale Fowler (01:10:44.208)
And down times, it actually helps you. You’re more thankful for that you have that. So if you buy conservatively, you can then step into another one, even a bigger home, even if you haven’t saved much of a down payment. But if you over buy, now you have a negative, now what do you have to do? You have to sell your home. And so it gives you some money for a down payment on a bigger home, nicer home, but you still own one property.
And so what’s easier for most people to get $100,000 of appreciation in a property or to save $100,000? Yes, appreciation. So that’s the biggest issue. When most people say they want to become an investor and they have a home right now, the issue is if they’re talking about going out and buying another property, then they’re going to come in with a considerable down payment. And like right now…
in this day and age, it’s really difficult, you know, as we were talking, it’s really difficult for people to save $100,000 when they’re trying to just make ends meet. So I have seen most people that I’ve seen that own investment property, it’s because they bought a primary residence conservatively on their first purchase.
They’ve probably been able to refinance it once or twice or three times, you know, to reduce their loan amount drops over time if they’re not pulling cash out and their interest rate drops. So that property becomes more and more cash flow. Ultimately, then they move up and they keep that property and see they’ve never had to be great, great savers. If they’re lower income or middle income, it’s more difficult for us to save that money. It’s easier to buy.
conservatively and they keep it and that’s like most of the people that I see that have two properties it’s because they went that route they bought conservatively on their first they kept it
Yale Fowler (01:12:48.402)
and then they moved up. Okay. So, Yeah, I like that. It’s a good strategy. Yeah, as opposed to over buying and just simply now you’re forced to sell because the numbers don’t work. Right. So see, I think if you’re gonna be an investor, you should even before you have a primary, start thinking about, okay, how do I keep this property and buy another one in the future? It should be part of your initial thought process if you’re already the mindset of wanting to be an investor. Okay.
Dude, we’re at an hour and 15 minutes already. You believe that? Wow. Flies by. Did we hit most of the topics that you wanted to talk about? We can always do this again if we didn’t. Yeah, just a few things that I wanted to talk about. I’ll just go by these points quickly. One is just understanding leverage in real estate and why it works so well. If you have $100,000 and you put it in the bank, and let’s just say you got a 10% return, at the end of the year, you have $10,000. Right.
That’d be a great return. I think most people would agree. Yeah. Why real estate works so well is if you have a $500,000 purchase and you take that same hundred grand, you put it down. So you’re financing 400, uh, and you’re putting a hundred thousand dollars to work of your equity. What’s an average real estate historical return? Like over a long term.
It’s over 10%, right? Okay. Well, let’s just take five. Okay. So let’s just say you had 5% historically, sure. Real estate. Well, the thing about real estate, why it works so well is because your percentage return is not like investments in the, in the stock market to say where you’re, it’s the money you put in produces the percentage return with real estate. It’s the purchase price.
the value of the property. So if you have a $500,000 piece of property and you put in 5% or put down $100,000 down, you’re financing 80%. Even at a 5% rate of return, that 5% doesn’t come off the 100 grand. It’s a 5% of $500,000, which is $25,000. So even if you had half the return, because now you’re getting that half a million, the percentage on that,
Yale Fowler (01:15:04.126)
And then imagine if you have five properties. So if you have five properties in that scenario, you can see how over time, if you can cash flow them and you can hold onto them, that leverage produces net worth. Like my client I was talking about, his properties, they’ve gone up from 200 or 300 thousand in value to probably 600, 700 thousand dollars. Think of how much.
that value that appreciation was returned by owning a lot of properties. You just got to be able to play the long game and yeah holding long be patient. Yeah I think appreciation is probably you know the greatest benefit if you are able to hold a property long term you just win. Yeah when you’re going there. Yeah another thing too is that I think is one of the biggest most
misunderstood or not recognized benefit of real estate holding a long term is the change in cash flow. So like a lot of clients that I’ve had that they’ve held real estate now for 20, 30, 40 years. So when they bought the home, it was their primary. They struggled. They tell me the stories of how they had to sacrifice to buy that house, right?
And there was this mortgage, it’s kept been, you know, they’re making principal every month. It’s 20 years later, 30 years later, it’s getting close to being paid off. They’ve refinanced it multiple times. And so their actual payment has gone down. And what’s happened to their rents way up you want to know it’s like in San Diego, for instance, where I grew up, go look what rents were for a house 30 years ago, and look at rents today.
So you have their monthly payment has just been dropping. But rents is they’ve converted those to rental properties. The rents have been going higher and higher and higher. And people don’t, they don’t think about that.
Yale Fowler (01:17:11.978)
It is such a major deal that when you hold something long term, even a break even property can become hugely cash flow positive because of the increase in rents over time.
And ultimately, you’ll pay off that property too, as well too. And so even if like a lot of clients, they’re just fighting to keep that property. They’re breaking even there. Maybe they’re losing a little. But as the years go by, that conversation changes. And now it becomes cashflow positive. And ultimately, they can use that to pay other bills or they can pay down their mortgage or have more cashflow to support a different property. So don’t you have to look long.
term in real estate and understand that your acquisition costs of today down the road may be very minor, rents will go up dramatically if they follow any historical standards.
That is something you can’t overlook. And that’s why people, they wake up 20 years later and like, oh my gosh, we’re worth $2 million. Right. $4 million because of all these properties that we have occurred, that we’ve had. Another huge thing is inflation offset. So if you think about as we get older, what happens to our earning power? It goes down. But if you hold investment properties, your rents keep going up.
your rents have the ability to keep up and increase your income over time to help offset the higher costs of things as well too. Seems like, I mean, there are obviously so many benefits. I think what I’m getting out of this is to just make sure to educate yourself so that you can overcome the fear of the unknown, right? If we understand what we’re dealing with, then it gets past that fear. And then hold on to these things long-term, play the long game, don’t be impatient.
Yale Fowler (01:19:10.046)
It sounds like a winning strategy overall. Oh, one thing I did want to talk about real quick too was your place on the totem pole. I think this is really, really important for people to understand. So if you’re new to the market, a lot of people think like, okay, when I’m ready to buy, I’m just going to go buy. It’s not that easy. Okay. So remember this, especially first time buyers.
you have to understand where you are on that totem pole. And what do I mean by that is, okay, so our market right now, it’s approximately 40%, I think, are cash buyers. Yeah, that’s what I’m hearing. In San Diego, I do a lot of financing in Southern California too, because I have a lot of clients there. I think in San Diego, I think it’s around 30% or so. So right off the bat, if you’re a buyer,
and your first time home buyer or even investor and you want to purchase a property if you have financing on it chances are 30 to 40 percent up front you won’t even see that property yeah a cash buyer is going to take it right okay so then who’s next well
Okay, if you’re selling your home and I come to you and I say, okay, your home’s worth $800,000. And I’m going to do, you know, a conforming loan. And I have $350,000 is a down payment. I just sold my other property and I have $350,000 is a down payment.
compare that to if I’m coming to you and I say well I’m going to do 97% financing I have very little reserves. A small appraisal could kill my deal if I’m a 97% or 95% financing person even if I want that property even if I was willing to make it up but if I don’t have make up that negative because in
Yale Fowler (01:21:08.318)
In real estate, we work off of the lesser of the purchase price or the appraised value. So if the home comes in a little bit low in value, then you may have to make up that difference between 100% of the difference between the appraised value and the purchase price. So if you’re a high financing person, which most people are in their first purchase, it means that you might not get your offer accepted right away.
If somebody else is coming to the table with three, 400 grand cash or 200,000 on a $500,000 purchase. So if, if you’re not cognizant of that.
Most of the people that I’ve been working with that are buying in last couple of years are all the people that couldn’t get their offers accepted during COVID because they were higher percentage financing. See that’s why in this market it’s a lot of borrowers that if they were struggling they just could not get their offer accepted. So if you’re buying in a super hot market and cash buyers come out everywhere it makes it even harder for you to buy. If maybe
Yale Fowler (01:22:17.852)
in your first time a homebuyer I think you actually have an increased chance of getting that home that you want because you probably won’t even begin to be in line if it’s a hot market. Yep, yep, so definitely seeing that that’s a big challenge for people. So you really have to take that into account. That’s good advice.
Well, man, that was good info. Thank you. You’re welcome. It was fun. Good conversation. Yeah. A lot to think about now. I’m regretting some of my life decisions as far as. Hey, we all do. Buying the thing you shouldn’t have bought. Yeah. I’ve been, I, you know, I’ve been up and down. I mean, I’ve had a lot of successes when the crash hit, it impacted me dramatically. And, uh, it took several years, but it just wore us out. Yup. Uh, and so.
anybody who’s, we all can look back. I know I can look back and say, what an idiot I was for all of the dumb decisions that I made over the years. We all have them, every single one of us, right? The only thing we can hope to do is just open up and learn from it. The most successful people that I talk to are the ones I notice. They open up and they talk with other people about their finances.
about their good decisions, their stupid decisions, and they seek advice from different people because they want other perspective besides their own. And often when we’re struggling financially, especially us guys, right? If we’re carrying a lot of debt and we’re really struggling, we don’t want anybody to know. We don’t wanna talk about that because we, you know, we’re too macho, right?
And it’s, is where’s I think, you know, women are fantastic at opening up sometimes more than us guys, you know, but it’s really important because when things are down, you want as much help as you can get. And I’ve been through all the ups and downs, just like most people. And if we can help people get to a better spot, great. Yeah. Wise advice, man. Wise advice. Well, thank you. Uh, thank you guys for listening.
Yale Fowler (01:24:27.262)
Yale Fowler with Expert Home Lending. We will have his information down in the description. So if you wanna contact him, obviously a wealth of information. Thanks Yale. You’re welcome.
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