Family and Finances: Episode 9, Part 1

Well, welcome back and today we're going to talk about all things involving real estate. And we love real estate. We have. Both of us have enjoyed it. And I was just thinking before we got started, we've owned six homes in our life. So we've, I would say we could call this real estate, the good, the bad, and the ugly. We've made a lot of mistakes, but some of it has worked out really well. And we've done, we've built, we've bought almost new and we've remodeled. Yeah. We've done just about all of it. When I think about real estate for couples, I think it's the biggest financial decision that we make as a married couple, typically, I mean, with very few exceptions, it's the biggest purchasing decision we make together. And so it's either going to be one of the best financial decisions we've made or potentially one of the worst. And through our years of counseling couples and helping people try to make good real estate decisions, we've seen both sides of that spectrum. Even now, you know, when there's sort of a real estate fever, we've seen couples get in a big hurry and make mistakes, particularly on things like their, what do you call it when you have the inspection. And remember we had a couple call us that their inspection was all good. They moved in and it was a fraud. Right. And someone had paid an inspector to deceive them. And so they bought a money pit, a nightmare. So let's start with being prepared to buy a home. Just in terms of your relationship, because things change when you become a homeowner. You're this happy-go-lucky couple in the honeymoon phase. You're probably renting your favorite apartment. It's all cute and there's no pressure.

You can lock and leave and travel. And now somebody in the marriage wants to buy something. And I think it's important to be united on that decision. Absolutely. Because owning a home brings whole new responsibility. If you have a yard, you've got to have, one of you's got to take care of the yard and you've got to pay to have somebody take care of it for you. There's maintenance issues that you're responsible for. You've got neighbors to deal with and, you know, it goes on and on. Yeah, we had a couple in just recently. I talked to them and they didn't come in to see you at that time, but they had had their furniture removed forcibly by their landlord, you know, by the mortgage holder and sat on their front yard when they got home from work one day. And the husband had told his wife that he was behind on the payments. Surprise! Yeah, it was a disaster. We put her in charge of making the mortgage payments after that. But the main thing is to be united, to be sure that you're prepared for the responsibility, that you've evaluated things like job security, motivation, why do you want to be. Because in some ways, you're giving up a little bit of freedom. I've known couples who've bought a house and they could never sell it. And they couldn't move when their job situation changed. And so they got into a real bind just by being homeowners. So there's some freedom in the stage of life where you may rent by choice. And that's happening more and more and more. People say to me all the time, well, I'm just throwing my money away if I'm renting. I always say, no, you're getting a place to live. And there's a benefit to that. It's not like you're just getting nothing in return for that. People also have to have adequate emergency savings because, you know, there are things

that happen in a home that have to be taken care of immediately. Well, on the financial side, I would say at least three months in emergency savings before you become a homeowner. You don't have to have that in an apartment because if the refrigerator breaks down or the hot water heater goes out, they fix it. Now you're going to have to fix it. So you need emergency savings. I believe you have to have a sufficient down payment. We'll talk about some of the financing choices later. But you also need money set aside for the cost of buying a house, which is your closing cost, your moving cost, your new furnishings, you know, all the little fix up you want to do. They say the national average right now is $10,000 your first year of homeownership that people spend just to get it the way they want their house to be. Hmm. I thought it might be more than that. You left out landscaping. That's your passion. You want to be sure the drive up appeal is great. You know, in our first house, we bought a home that was had been destroyed by a tornado. And we built together our first house and that didn't, I mean, that was a test of our marriage, don't you think? Well, it was small. We bought a slab. And we learned a lot from that. We agreed after that that we would never try to put up wallpaper together. That's for sure. You want to tell people what happened? Well, I'm sure you'd like me to. I would.

Yeah, I mismeasured. Mismeasured and you tried to tell me I was wrong and I discovered that I was after I'd already cut it. After it was too late. You can't put that wallpaper back together. But we learned a lot and we grew together through that experience and we made money on that house. That was a good investment for us. We haven't made money on all the houses that we've bought in our life. And from that we've learned how to get much better at it. And I hope today people learn from some of the mistakes we've made so they can benefit on their house. Let me just transition to how to buy a house. I believe the first and most important thing is to be slow. Never get in a hurry. You know, sometimes we fall in love with a house. We emotionally buy it. I used to work in real estate, as you know, Ann, and I would watch people emotionally buy a house. And I couldn't talk them out of it once they made that decision. And when they emotionally buy it, I could tell they were walking around measuring. They were placing furniture. They were imagining where their dog would be or where their, you know, the cars or the bicycles would go. And you just knew it was all over and they couldn't be talked out of it. And that's a dangerous place to be. So for you and I, we've always said we'll never get in a hurry on a real estate decision. No, we learned to know your market really well. We always try to buy the least expensive or the lower cost home in a neighborhood. That's one of our rules of thumb. We look for the lowest cost home in a good neighborhood. Right. So that we never want to be the highest price. And the idea there is that we would have the most marketability when it was time to sell. When we also had leeway to do, to upgrade.

To improve the value of the home. Right. And hopefully get the benefit of that. We always want to choose a great location that starts, at least in America, with what's the school district. Because that impacts people's finances. If they can't put the children in that school, they have to either homeschool or pay for a private school. Right. And you've got to consider transportation costs. Yeah. How close is it to your work? Right. What's the crime rate in the area? What's the history of crime? Today people are doing, checking these websites that reveal if there's any people with federal offenses in your neighborhood. So that you know before you move in. You and I always drive around and meet the neighbors. Yes. Every time. That's best information. Yeah. We ask them how they like it. If everybody gets along. Any problems. And they'll tell you. Yeah. We learn about homeowners associations. Yeah. We also study the history of the resale in that area. And I think, look here's one of my best rules of thumb. Buy a home that other people want to buy.

You know people sometimes look for a home that's been on the market a long time. Thinking they're going to get a great deal. Usually they're not. Because nobody wants to buy the house. Yeah. Now if it's been in foreclosure. That will mean one of two things. Either somebody bought it and got in financial trouble. And they couldn't pay their mortgage. And now the home's back on the market. Or, which is most often the case, there's a problem with the house. And nobody else wants it. It's either a water problem or a power line problem. Or mold or something that prevents other people from buying it. And that's why it goes into foreclosure. So we are very careful to do the inspections. And to be sure that it's a home that somebody else would want to buy from us. And I think that's helped us start to do much better on our decisions. When we just look for a cheap house or a deal, you can get into trouble. I think also on this principle of never buying a problem. If you buy a house that has a problem that you can't fix, then it will be your problem after you buy it. We had a friend that bought a house that I'd say sat down in a hole. And water ran down towards their house. And they were going to fix it, right? Well, it didn't really get fixed. Still, there was a perception that water was going to run down into the house. And they lost money after they fixed it up. Because that problem didn't really go away. If it's on a busy street, you're not going to probably change the traffic flow.

No. And if you've got high power, wires above you. People are concerned about their health now and so we wouldn't ever do anything like that. Another thing we like to take into consideration is it is it is it a home where we can have people in? Can we exercise hospitality easily? Is there good parking? Is there good space to entertain people? Is is the possibility to have an extra room or you know you sleep or sofa somewhere? Is it is the floor plan segmented where we could bring somebody in if we needed to? Even like a member of our family we've been looking at options now if we turn into the sandwich generation where your mother or my father could live with us and so we're set up for that and anticipated that.