Robert Leonard (00:03:37):
And you get to work with Scott.

Mindy Jensen (00:03:39):
And I get to work with Scott.

Scott Trench (00:03:43):
She says something different when I’m not on the show.

Robert Leonard (00:03:47):
On this show, we mostly talk about investing strategies, but today, we’re going to dive into a topic that’s not necessarily “an investing strategy,” and that’s being a first time home buyer. It might not be a traditional investing strategy, per se, but it’s something that nearly everyone goes through or considers, and it can have a massive impact on your future as an investor. In the new book that you two wrote together, you wrote, “Your home can destroy your wealth and freedom or generate the same, and this book will show you how to make a decision that gives you the most financial flexibility possible.”

Robert Leonard (00:04:21):
How can buying a home destroy wealth and freedom?

Scott Trench (00:04:25):
If you think about what the typical home buying purchases, maybe not everybody’s doing this, but taking it to the extreme. Let’s say I’m making $80,000 a year, and over the course of four, five, six years, I save up $40,000 outside of my retirement accounts. Well, what I might do is I might call a lender and say I’m ready to buy a house. I go to that lender, and they qualify me for $400,000 in mortgage. What do I do? I go buy a house that’s $440,000. I put down 40,000 as a down payment, and I take a loan for 400. What this does is it uses up all of your liquidity. You’re now back to broke or very close to it, and you’re likely going to assume a higher monthly payment in the form of your new mortgage than maybe what you’re paying previously in rent.

Scott Trench (00:05:08):
This is surprising. They’re shockingly common activity and situation for many first time home buyers. What happens is now you’ve used up all your liquidity, and your monthly run rate is higher just in terms of your mortgage, your principal interest, taxes and insurance, not to mention all of the maintenance and fun surprises that come along with home ownership. At the strategic level, buying a home that maxes out your purchasing power will make it harder to invest or create wealth in virtually every other area of your life. It’s harder to invest in stocks. It’s harder to contribute to 401(k). It’s harder to buy rental real estate or whatever else it is you want to do with your after tax dollars.

Scott Trench (00:05:49):
Our book is framed in the concept of three challenges that confront the first time home buyer. One is the strategy of like, “Generally speaking, how do I avoid that trap, but still buy a house that’s reasonable and practical, and gives me a good lifestyle, but that gives me much more freedom?” That’s a several hundred thousand decision, in our opinion, over the course of a decade or two. The second part of the book is framed around actually putting yourself in position to buy a good deal. What is a good deal? If I’m trying to buy a $400,000 house, or that’s my price range, how do I get the most value in that context as part of my purchase?

Scott Trench (00:06:28):
Then the third part of the book is really about what to expect during the transaction process itself, the specifics of like, “Hey, my inspector is going to scare the living daylights out of me with the inspection report during that, and how do I walk through all of those kinds of things?”

Mindy Jensen (00:06:43):
Scott said that many people or some people do this. I would say most people do this, because what is the first step when you are going to buy a house? “Oh, how much can I afford?” You call up your lender. The lender will ask you a series of questions, “What’s your income? What are your debts, blah, blah, blah?” You share the information with him, and they say, “Oh, we can approve you for up to a $400,000 loan.” A lot of people hear that and think, “I need to buy a $400,000 house,” but that’s not actually maybe the best policy as Scott more eloquently explained.

Robert Leonard (00:07:17):
Every time that I’ve bought a house, I’ve known that I would qualify for significantly more than what I was actually trying to buy, and so every time I’ve gone to buy a house, I’ve always had no problem getting the loan that I was asking for, but I always ask them. I always almost play a game. I ask the lender, “What would you have qualified me for if I had wanted more?” It’s always really interesting to hear that they would really qualify you for so much more than what you’re asking for.

Scott Trench (00:07:44):
Well, it seems that way to you. That is not how most people do that. You probably were not going to be pleasantly surprised in your first purchase, I bet you. It’s the second and third purchases. My understanding is your story, you’ve now house hacked two or three times?

Robert Leonard (00:07:57):
Three.

Scott Trench (00:07:59):
What that means is that you have rental income that is coming in that supplements your wage income, that supplements your other passive income streams. Now, you have an extraordinary amount of income that you can be lent on. Your first purchase, that was not true. I would be willing to bet. That would be multiple of your income basically or a percentage of your income that they would be using to compute your debt to income. For example, when I first bought my first house hack, I could qualify for about $280,000. I bought a $240,000 duplex house hack when I got started on my journey. But all of a sudden, my wage income hadn’t changed that much, but because I had years of rental history, my financing option was $800,000 or something ridiculous like that.

Scott Trench (00:08:39):
I could get a million dollars leverage if I wanted between a couple of creative solutions. That’s a great point and a great example of, “Hey, if you buy your first home wrong, and max out to your limits there, you’re not going to have that luxury that you and I, Robert, had when we went to get our next homes, because you’re not going to have that income from the rental or the other sources of income or the investment income that you’re otherwise able to build if you purchase your first one well below your means, and we’re intentional about building wealth.”

Mindy Jensen (00:09:11):
I like what Scott said intentional about building wealth. I can’t remember how much I qualified for my first house. I bought it. It was a condo. I bought it for $50,000, but I did not factor in my HOA dues, which went up to 100% the month after I bought the condo, because I didn’t read through the HOA docs. I didn’t read through their financials, and it turns out they had no money in reserves which is a bad thing. I was almost instantly house poor the very first time I did it. I was unable to contribute to a 401(k), and save and all of that because all of a sudden, my $200 a month HOA due is now $400 a month, which is a lot when you’re making $24,000 a year.

Robert Leonard (00:09:57):
One of the most tried and true quote in real estate is just location, location, location. I’d say that an equally similar or popular debate is this rent versus buy debate that a lot of people have. How do we know which is better for us? Isn’t buying a house always a good idea?

Mindy Jensen (00:10:15):
Always, 100%. There’s no black and white. This actually, I never understood the concept that your home is not an investment until I’ve read an article from J.L. Collins. He said, “Your home isn’t an investment, not if you buy it the way that most people buy it.” I had never bought a house like that. I had always bought a house that was a complete dump, and I fix it up, and then it’s worth more. I just invested. I made a lot of money. Every time I sold a house, I have made money except one, which I bought as a regular house, not a fixer upper. Lo and behold, I didn’t make any money on that. I lost $13,000 happily, because I hated the house and the neighborhood, but that’s another story.

Mindy Jensen (00:10:55):
If your mortgage is going to be significantly more than what you can rent a similar property for, it’s probably not a good idea to buy a house, unless, of course, you are going to buy a dumpy house and make it beautiful, and then sell it, but you need to have more than one exit strategy if you do that. That’s, I think, another question, another conversation. Right now in the Bay Area, houses are appreciating exponentially month over month. New York, same thing. Actually, in most markets, right this very moment, everything’s appreciating month over month, because there’s nothing on the market. The market inventory is extremely low in most markets.

Mindy Jensen (00:11:32):
But in general, the coast cities are going to be less financially advantageous to buy a house, especially if you’re not planning on being there for at least five to seven years.

Scott Trench (00:11:44):
Just to add on to that, the rent first buy challenge, I think fundamentally, the most important lever is how long are you going to own the property? Not, “How long are you going to live in the property, but how long are you going to own the property?” Because when you sell a property, what most people don’t think about is that there are significant costs associated with selling the property. There are costs associated with buying the property, maybe 1% to 3% of the purchase price. That’s going to be $3,000 to $9,000 if you’re buying a $300,000 property, but when you go to sell the property, it’s going to be 7% to 8% of that, which is, what, three times seven, $21,000 to $24,000 on that $300,000 property.

Scott Trench (00:12:21):
As soon as you buy that property for $300,000, you’ve now spent a few thousand dollars closing on it as a buyer, and if you were to just turn around and sell it tomorrow, you’d be out about $24,000 in sales costs, right? You’re also assuming the mortgage and all that other kind of good stuff. That said, the difference between owning and renting is that you’re building equity in the property as an owner. Your inflation or appreciation is increasing the value of your property over time in a way that you did not benefit from as a renter, and you’re paying down the mortgage. The offset, both choices is an expense. It’s not an investment.

Scott Trench (00:12:58):
Your house, as most people purchase the house, is not an investment. It’s an expense. It can be cheaper to rent or to buy, and that fundamentally depends on your timeline that you’re going to be living in the property. That said, if you’re in a rapidly appreciating market, then obviously, the timeline condenses. It can make sense to buy even if you’re going to live there for just three or four years or even shorter if you’re getting a crazy appreciation rate. But in general, I think that bubble is going to be in five to seven-year timeline. We’ve got a little spreadsheet that I crafted as part of the bonus content for the book that maps out what that looks like.

Scott Trench (00:13:32):
As a result of that, I just wrote a book called First Time Home Buyer, and I am renting personally because I’d be a hypocrite, so I put together that spreadsheet and put that together not because I’m a hypocrite, because it makes sense. This is logic that I apply to my own life. I don’t think I’m going to be in this location for more than a few years. It didn’t make sense to house hack or live-in flip for the lifestyle I was going for, and so I’m actually renting because I’m not going to be here for a long enough timeline. I have bought in the past, and I will buy again in the future. But for now, the equation makes sense in the rental side for me.

Robert Leonard (00:14:04):
I did not know that you are renting, Scott. I thought you are still house hacking.

Scott Trench (00:14:07):
I house hacked for seven years, and now I am renting. My house hacks are paying for the rent, which is very nice. But no, I rent currently.

Robert Leonard (00:14:16):
Interesting. For people that might be wondering why the cost when you sell are so much higher than when you buy, what’s that additional cost you’re paying when you sell that you’re not paying when you buy?

Mindy Jensen (00:14:26):
Oh, you’ve got your real estate agent commissions for both your agent and the agent representing the buyer of your property. This isn’t the case in 100% of the transactions, but it’s the case in 99% of the transactions. The seller pays the commissions for both agents. There is title insurance that you are paying for the bank who is lending the money for the buyer to buy the property. There’s just random little bits of maybe you have transfer taxes. Maybe you have metro taxes. There’s all these little tiny things that you don’t consider, but I think 78% of the purchase price or sales price, and I would say more like 8% is a good rule of thumb for when you’re getting ready to lease a house.

Scott Trench (00:15:12):
The agent that is selling your house and the agent representing the buyer buying your house will expect a 2.5% to 3% commission typically in various markets. That’s 5% to 6%. Then the remaining 1% to 3% is going to be a similar proportionally to what the buyer is paying in closing costs when they buy the home with just little differences here and there.

Robert Leonard (00:15:33):
That commission piece is that big component that you don’t have when you’re buying because like you said, the seller is paying that, so when you’re buying, the reason you don’t have that cost is because the seller that’s selling you the house is paying that portion of your agent’s commission. You’ve heard having a buyer’s agent is free, and will…

Scott Trench (00:15:47):
It’s not free. It’s free to you, but somebody is paying that. In this case, it’s the seller.

Robert Leonard (00:15:52):
That’s right. We talked before that there’s a big discrepancy between what the banks think you can afford and what you can actually afford in terms of a smart financial decision. You can’t even always just trust the online calculator, so how do we determine how much house we can actually afford? Is it a fixed dollar amount for the purchase price, or is it more important to focus on the mortgage payment?

Mindy Jensen (00:16:14):
I was just going to say how much house can I afford is the wrong question to be asking, because that question, the way that it’s framed, is saying what’s the most I can spend? That’s not where you should start. Look at what you’re paying for your current housing costs. Let’s say you’re renting an apartment, and it costs $1,000 a month. How does that feel in your budget. If you’re making $10,000 a month, $1,000 a month might be real comfortable. If you’re making $2,000 a month, maybe that’s going to be super tight. Look at what you’re paying versus what your income is, and look for a mortgage payment that is very similar to that.

Mindy Jensen (00:16:52):
You want your mortgage payment to be all inclusive. It’s called PITI or P-I-T-I, principal, interest, taxes and insurance. If you are A in HOA, PITI HOA, [inaudible 00:17:04]. If you have an HOA payment, factor that in too because that is going to come out of your pocket every single month no matter what. Then if you’re looking at properties that the bank says, “Oh, you can have 400,000,” and you’re looking like, “Wow, $1,000 was really comfortable. This is going to be a $2,000 a month payment.” That’s not going to work for you. Look at what your finances are.

Mindy Jensen (00:17:25):
The bank is not going to help you make that payment, so you don’t want them to be telling you where your payment is going to be. You want to be directing that conversation. Scott, I was thinking we should have some sort of like… I tried to look up a mortgage calculator where you put in your payment amount, and it tells you how much you can afford. All I kept finding were reverse mortgages, which is a very different thing. Don’t get a reverse mortgage.

Scott Trench (00:17:47):
I just think if you start with the, “Here’s the maximum amount I can qualify for a mortgage on,” and you bring that to your agent, they’re going to just put you… The property that’s $400,000 is either going to be in a nicer area or nicer than the property that’s $300,000, right? That’s true with everything you could ever purchase in life, right? Generally speaking, the more expensive item is going to be more desirable to some extent with that. It’s just a matter of understanding, “Hey, the cost of buying the Lamborghini is things that you can’t get elsewhere in your life, and delays in your freedom, right?”

Scott Trench (00:18:22):
The consequence of buying the house that maxes out your purchasing power is that you are effectively ceding control over many other life decisions to your employer, because you’re probably already optimized on the income front. You’re not going to be able to accumulate liquid wealth near as well buying the $400,000 house as you will with a $300,000 or $250,000 house. You’re going to be stuck there for a while in that situation. That’s I think the consideration to think about. It’s, “What do I value? What are must haves? What are nice to haves, and then how do I get the most value in my purchase across all of the things that I’m looking for,” rather than just looking for the nicest house, because then the $400,000 house is going to be nicer than the $300,000 house, or it’s going to be in a better location.

Robert Leonard (00:19:08):
Mindy, I’ve actually looked for a very similar calculator, and I was not able to find anything either. I think the issue is that the taxes change, and some other things change when you try to back into it. I think that was the problem that I found when I was trying to use a reverse calculator if you will. I ended up just building my own, but I think the question of how much house can I afford, one of the issues is interest rates and taxes play a huge role in that, because you could buy a $300,000 house at one interest rate in one tax bracket or a low tax area, and buy a $300,000 house with a different interest rate and lower or higher taxes, and it might not be as expensive.

Robert Leonard (00:19:43):
Those are huge factors that play into really what you’ll end up paying on a monthly mortgage, and that’s a big piece of it. You can’t just look and say, “I can afford a $300,000 house or $400,000 house.”

Mindy Jensen (00:19:53):
That is a super important thing to bring up is property taxes, because there’s vastly different property taxes. These United States of America have 50 different property tax, probably more than that actually. It’s-

Scott Trench (00:20:07):
Where I live, every city is different.

Mindy Jensen (00:20:09):
Exactly. There’s a million different ways to figure out property tax, but I think a lot of people don’t factor that in as well. “Oh, I can afford $400,000.” Well, yeah, if your tax rate is .5% like I have here in Colorado, but when I lived in Wisconsin, it was 2%. Basically, the house that I lived in in Wisconsin, the tax bill was my entire mortgage payment here in Colorado.

Robert Leonard (00:20:35):
I owned a house in Massachusetts, about 150,000. They have sales tax, which isn’t great as a consumer, but because of that, they typically have low property taxes. I think my property tax was maybe .300 for the year, which wasn’t bad on 150,000. Originally, I’m from New Hampshire. I bought a house in New Hampshire, again, 150,000. My property taxes are $6,000 a year, so almost three times as much. Then I just bought another house also in New Hampshire. It was almost 400,000, and the total property taxes were only 8000. Clearly, it’s significantly less from city to city, even state to state. That’s why it’s such a huge component of, really, how much can you afford?

Scott Trench (00:21:14):
We did study this for BiggerPockets when we looked at all the property taxes around the country, and we slog through these archaic calculations with mill levies and all this kind of stuff. Everyone’s got a different formula for it, but it seems like property taxes on average across a lot of cities are pretty consistent in absolute dollars. Just the values, for example, in Colorado are significantly higher than the values that you’re talking about in Massachusetts, New Hampshire, but the property taxes are still $2,000, $3,000, $4,000 a year on those higher values.

Scott Trench (00:21:46):
It seems like it costs about the same per person to run many cities across the country with the exception of Chicago, which they seem to need a heck of a lot more per person to run that city. I’m not sure exactly why, Mindy, but [inaudible 00:22:00] for you.

Mindy Jensen (00:22:00):
I had a very interesting talk with Jim Collins yesterday about Chicago in general. Yes, it’s expensive, and that’s all we’ll say.

Scott Trench (00:22:10):
Moving on. What’s your next question, Robert?

Robert Leonard (00:22:12):
It’s funny that you talked to Jim about Chicago, because he’s also a New Hampshire native. When I spoke with him, we spoke about New Hampshire. We actually, funny enough, lived about 20 minutes from each other without ever knowing it, but yes, that’s funny. I’ve talked about properties, property taxes, and things like that with him as well.

Mindy Jensen (00:22:27):
He’s an interesting guy. His comment, though, “Your house is not an investment,” is really, really eye opening, because you have been fed, “Your house is an investment. It’s the biggest investment you’ll ever make.” No, it’s the biggest purchase you’ll ever make, most likely, unless you’re buying the Empire State Building, but just because it’s the biggest purchase doesn’t mean it’s a big investment.

Robert Leonard (00:22:49):
If we decide we are going to buy a house, how do we get our financial situation in order to prepare for the big purchase? What are the most important things for us to focus on to get ready?

Mindy Jensen (00:22:59):
Your credit score has to be decent, because you are going to pay a lot of money in extra interest rates and extra fees and things like that if you have a bad credit score, because you look like a risk. Your credit score is basically you doing what you said you would do financially. I said I was going to pay this credit card bill, but I didn’t. I didn’t pay it on time, so now my credit score is in the toilet. Why would a lender give you money to buy a house when your credit score is garbage? You said you were going to pay your credit card, and then you didn’t. How do I know you’re going to pay your mortgage payment when you didn’t?

Mindy Jensen (00:23:35):
On time payments is one of the top factors into your credit score, so if you have a history of not paying your bills on time, change that habit. Start saving for an emergency fund for your house, because something’s going to break as soon as you buy the house. I don’t say that to make you scared, but I say that to prepare you. When you buy a house, something breaks almost instantly. The cost of that item is inversely proportionate to how much money you have in your bank account, so if you are well funded and sitting on $10,000, $15,000, it’s like a broken lights switch cover. But if you have no money, if you just spent every dollar you had in savings on your down payment, you’re going to need a new roof or a new air conditioner or a new furnace or a new something.

Mindy Jensen (00:24:16):
It’s going to be an immediate fix. That’s not written in stone, but Murphy’s Law does rule real estate.

Robert Leonard (00:24:23):
I was just going to say Murphy’s Law.

Mindy Jensen (00:24:25):
Yes, How do we get our financial situation in order? You need to have a lot of money. Brandon Turner has written a book called How to Invest in Real Estate with no and low money down. I do not think that you are doing yourself any favors by investing in real estate coming from a poor financial position. If you have a strong financial position, you’re going to do great, but Brandon’s book is more about investing with none of your money. When you’re buying a property for yourself, you need to have your money because who’s going to pay for this stuff if it breaks? You just want to be prepared.

Scott Trench (00:24:59):
I would say specifically, it’s that credit score and that 700, 750 plus range, if you can work that out before the purchase, I think then it’s about having the down payment, and $10,000 to $15,000 on top of that down payment in reserve. That’s where people get hung up, because they’re like, “Oh, $300,000 house, I need $60,000 plus another $10,000 to $15,000 at several lifetimes away of accumulation.” Well, no, you don’t need to have 25% down. I’m not saying that. You gotta have the down payment. You could purchase with a 3.5% down payment, and have a $10,000 to $15,000 reserve with a good credit score.

Scott Trench (00:25:38):
I think you’ve got a very reasonable financial foundation to buy your first home. That is a $20,000 to $25,000 purchase. It’s 3.5% on a $300,000 purchase, which is the median price. You may think that’s crazy high or crazy low, depending on where you’re listening from, but the medium is 300. 3.5% is what? $10,500 on that purchase price, so that means that in order to buy a house, the minimum would be about $20,000 in savings in order to buy that in liquid cash to have a pretty reasonable base. A better base would be 25,000, but you could probably begin your search around that 20,000 mark, and continue to buffer up that savings while you’re rounding out that search.

Robert Leonard (00:26:19):
The only cost that I might add to that is you should have money set aside for closing costs as well, because those tend to be significant. At least where I am, the house that I just bought, closing costs were about $10,000. That’s another significant cost that you need to take into consideration. I’ve actually negotiated a seller credit on every single real estate deal I’ve ever done, so I’ve never paid closing costs myself, but that is often a cost for a lot of people.

Scott Trench (00:26:42):
Absolutely. Thank you. Yes, I forgot, we actually have that outlined in the book, and I just forgot to mention. Yes, it’s down payment, closing costs, and then reserves of $10,000 to 15,000. Those closing costs can vary. For me, I’ve been able to largely wrap most of my closing costs into the mortgage that I’m getting, but that can vary depending on location, which is a great point for you to bring up, so thank you.

Robert Leonard (00:27:02):
I mentioned at the beginning of the show that buying your primary residence typically isn’t an investment, but if it’s not a specific way, your first home can actually turn into a cash flowing investment in the future. What steps do we need to take to make this a reality? What are the early decisions we need to make early on before we make the purchase?

Scott Trench (00:27:20):
I love this one. Earlier, I said that the key to making a home less expensive living option than renting, we’re not talking about investments yet, but it’s how long you own the property, not necessarily how long you live in the property, but how long you own the property. There are three exit options that are likely to be in place for most people. Those are living in the property forever, which I think almost everybody over rates or over expects unreasonably as overweight’s as a probability in their journey, so living the property forever, keeping the property as a rental property after you move out or selling the property for a gain. The goal here when you buy your home is to come up with the right exit strategy.

Scott Trench (00:28:03):
This is part of part one discussion of the book is understanding that the housing is at expense the way most people buy it. Then to offset that expense or turn it into investment, you have to think through these three exit options, living in it perpetually, selling it for a gain, or renting it out. The way you create the most optionality with those exit options is to buy with those in mind upfront. If you’re analyzing your property, for example, as a good rental property before you buy it and live in it, well, great. After a year or two, you could move out and keep it as a cash flowing rental, and that’s a perfectly viable situation.

Scott Trench (00:28:38):
You’re only living in that property for one or two years, but you’re able to keep it for five, six, seven, and offset all of those transaction costs with the long-term appreciation and mortgage amortization that you might get. The other option is to sell it for a gain. Most people apply the buy and pray approach when they’re looking to sell the property for a gain, where they buy the property and then just hope it goes up in value over time in line with the market. But I think that by improving the property, you can give yourself a lot better option for that.

Scott Trench (00:29:05):
I think that’s where Mindy has really mastered that one. I haven’t really done a lot of really meaningful rehab type properties. I’ve done the buy a property that makes sense as a rental, and move out strategy a few times. She’s done the live-in flip option.

Mindy Jensen (00:29:20):
The live-in flip is when you buy a property that is ugly, very unattractive, old, outdated. Many times, it has been smoked in, but you buy something that’s habitable, and that’s really key. I’ve never bought a house that had meth. Well, I guess I should say I’ve never knowingly bought a house that had meth. I mean, I don’t know. I never found out about it afterwards either. I don’t mess with mold, and I don’t mess with foundation issues, but you can start off with a house that’s just really unattractive. Shag carpet is your best friend because it’s really easy to replace flooring. Anybody can paint.

Mindy Jensen (00:29:56):
There’s a lot of things you can do without moving walls. A rehab doesn’t have to be like, “Take it to the studs. Redo absolutely everything. Move walls around. Add bathrooms.” You can just paint and have a whole lot better house. Paint the cabinets if they’re really ugly, if you don’t really want to replace them. We move into a house. We rehab it usually all the bathrooms and the kitchen. The kitchen is going to be a really easy way to improve your property inexpensively. I say inexpensively, because we do all the work ourselves. Finding a contractor can be difficult. We’ve just learned how to do everything.

Mindy Jensen (00:30:30):
We do… YouTube University is a really great way to learn how to do absolutely everything. Before the pandemic, you could go to a big box store and take a class. You’ll learn how to lay tile with their tile and their tools and their cement and all the things. It’s hands on without actually ruining your floor, but I haven’t done anything that I couldn’t undo. Now, we started off light with laying tile and painting and a new kitchen. Now, we’re doing electrical and plumbing, and we just finished off the basement. We started it out, and completely, it was nothing. It was cement walls and cement floor.

Mindy Jensen (00:31:07):
You just add on as you go. I have never sold a house for less than $100,000 profit. That’s all tax free for me, because I lived in the house for two years as my primary residence, so I pay no taxes on my capital gains. I’m actually hoping for a day that I can pay taxes on my capital gains, which is a $500,000 profit.

Scott Trench (00:31:28):
There’s a lot of nuance to the strategy. Everything we’re talking about is a spectrum here. Mindy, has in the past or recent past, I would say gone pretty far along to the more extreme end of the spectrum where she’s done major rehabs, and significantly increased the value of her properties, and been able to sell it for a tax free capital gain. But again, you could just go in and pull out some shag carpet in the basement, and update the walls and those types of things or improve the landscaping and do that slowly over a period of two, three years. That might add a good amount of value to the property, and give you a much greater chance of selling your property at a gain rather than being at the mercy of the market and hoping that that carries you.

Scott Trench (00:32:06):
Then on my end, I’ve gone the extreme end of buying dinky little duplexes, living in half, and renting them out to maximize the amount of rent income I could create relative to my mortgage payment, but you can live in a luxury duplex or a luxury home and rent out a couple bedrooms or whatever in between, and offset your mortgage partially. There’s a spectrum here to understand. But keep in mind, the three exit options are the living in the property forever, which really shouldn’t be your plan, or we recommend it shouldn’t be your plan, at least not in 2021 if you’re buying for the first time, selling the property for a gain or renting it out and renting it.

Scott Trench (00:32:40):
Then there’s all these permutations, short-term rentals versus long-term rentals, live in flip major rehabs, just some tidying up work, those types of things. We try to outline as much of that as possible.

Robert Leonard (00:32:51):
I forget what show it was or even what medium it was. I think it was a podcast probably, but Mindy taught me indirectly about live-in flips. I had done a house hack indirectly, and then I wanted to do another house hack, but I just couldn’t find one, and so I ended up doing a live-in flip. Scott, you talked about the spectrum. I am on the easiest side of the spectrum, because I can’t swing a hammer to save my life, so I ended up buying a live-in flip-

Scott Trench (00:33:15):
It looks like you posted one picture behind you on the wall.

Robert Leonard (00:33:18):
It’s about to fall down. If I put a fourth book on here, it’s going to fall down. I can’t do anything like that. I was like, “All right, I gotta keep this easy.” What I ended up doing was I bought this half of a duplex. I want to buy the whole thing so I can house hack, but it wasn’t for sale, so I bought half. I recognized this is a really family-oriented neighborhood, but this yard is awful. No family is going to want to buy this because there’s no space for any kids or pets or anything. I ended up buying the property. I’d put about, I don’t know, maybe $5,000 into renovating the outside, made the landscaping, graded it so it was all flat, put up a fence, made it really nice for a family, did some paint on the inside, nothing major.

Robert Leonard (00:33:55):
I can actually use a paintbrush, surprisingly. That was pretty much it. That was all I did, and I ended up selling it two years later for an $85,000 gain. It was really relatively minor, but it made it fit the neighborhood a lot better than it did when I bought it.

Scott Trench (00:34:09):
That’s all it is. You had an exit plan going into the purchase, and you didn’t require a ton of work. But most people’s average salary is $80,000 or less, so you’re making two years of income tax free by making this decision correctly and intelligently, especially in the early days. One day, you may buy the forever home. That’s really nice, but you’ll be able to do it from a position of complete strength. I just think this is such a key lever and a huge financial consequences over time for people. I admire your choices there.

Robert Leonard (00:34:40):
Mindy, let me know where you want me to send your commission check.

Mindy Jensen (00:34:44):
You can send it to the BiggerPockets’s offices, but I will disagree with you. You can swing a hammer. I think there’s a lot of people who are like, “Oh, I don’t know how to do anything.” What’s the worst that can happen? I mean, with plumbing and electricity, you could have some bigger things I wouldn’t recommend starting off trying to rewire the house, but you can change out a light switch. Step number one, turn off the electricity, or you need to change the faucet. Step number one, turn off the water, and then try it. If it doesn’t work, keep the water turned off and call the plumber, or put it all back together.

Mindy Jensen (00:35:17):
I actually hate plumbing, because I’m not strong enough to tighten it enough to turn it off, but there’s a lot of things that you can do that you might not think you can do. Installing flooring seems like it’s really difficult. It’s not. Watch a video on YouTube. If you don’t like what they’re doing, watch another one. There’s 25,000 videos on every subject you could possibly imagine, or maybe 25 million. I don’t know. There’s a video out there that will teach you how to do it, and they’ll explain it in such a way that you’ll be like, “Oh, I know what they’re talking about now.”

Mindy Jensen (00:35:50):
You really can learn how to do this. I learned it from a book. I’m older than YouTube, so I learned it before YouTube was even out there helping you. If you want to learn how to do a project, YouTube it, and you would be amazed at how many thousands of videos there are out there to teach you how to do it. Also, if you want some hands-on experience, come into my house.

Scott Trench (00:36:11):
There’s a lot of things that I don’t like doing, but I do anyways, depending on the reward for it. I’m sure you didn’t enjoy painting your house, but you make $85,000. That’s a large dollar per hour activity, and paying somebody else to do it can be way more than your hourly rate, especially in the early stages of going with your wealth journey. I just think it’s a matter of being open to that, and knowing that the difference, that can be a 20, 30, 50, 80, $100,000 decision to at least leave that as an option open your initial hunt and framing of the property search. It can make the exit options that much easier to achieve if you’re willing to go in with the mindset of being open to a little bit of that. Make hundreds of thousands of dollars or millions of dollars difference over the years.

Robert Leonard (00:36:56):
YouTube has definitely taught me a lot, but I learned a lot from BiggerPockets. It’s probably taught me the most about real estate. One of the things Brandon Turner talks about a lot, I can still hear him saying it in my head is, “If you don’t enjoy doing something, pay somebody else to do it.” That’s where I fall. I’ve definitely come a long way in terms of being able to swing a hammer. I could do a lot more now than I could when I bought my first house, but I just really don’t like it. It’s not something I’m really enjoying that much, so I typically hire it out.

Robert Leonard (00:37:24):
When I moved into that live-in flip, I painted myself part of it. Then when I sold, I actually hired somebody to paint the whole thing because I was like, “I’m not painting again.” I just absolutely hate painting.

Scott Trench (00:37:34):
That’s true, except for on your very first deal, as you’re getting started with all of your cash and liquidity at the 100% of the stakes on the line in that position. In that case, it’s hard to justify paying somebody else to do it for most people, at least it was for me, but now, I agree with you.

Mindy Jensen (00:37:53):
Well, and knowing how to do it is very important, because then you can hire it out. I know that Scott is doing it 100% wrong, because I know how to do it. I’m watching him do it, and I’m going to fire him, or I know Scott’s doing it right, because I know how to do it, and he’s doing it the way that I would have done it. I have a list of four things that I will never do, cement flatwork, roofs, gutters, and drywall. I’ve done many of them. I’ve never done a roof. I have enough money for that. I’ll work a second job to get enough money for that.

Robert Leonard (00:38:25):
Drywall can be frustrating. That’s one of the things I won’t do either. I think one of my “competitive advantages,” I guess you could say is that my dad’s a blue collar guy, so all his friends and family members are all blue collar people, so I typically can get a relatively good rate on a lot of the stuff that I need done because they know my dad. I’m not paying a random contractor that I don’t know full market value either. I’m also able to get a little bit of a discount, which is helpful that I don’t have to do it.

Mindy Jensen (00:38:52):
That is huge that you can even get contractors to call you back right now, even if you’re paying the exact same price that everybody else is. It is so difficult to find a contractor right now. When you’re looking for a contractor, if you need somebody to do work, talk to absolutely everybody you know. I’m looking for somebody who paints, “Oh, my dad’s a painter.” “Great.” If your friend’s dad is a painter, he might actually call you back. I have a friend who is a plumber. I try not to bother him because he does really big jobs, but if I need something, I would lean on him. “Hey, Mike, my flux capacitor broke. Can you come fix it, please, or whatever it is,” but knowing people is really, really powerful.

Robert Leonard (00:39:30):
My dad has built up a lot of goodwill over the years, and I’m finally able to tap into the goodwill that he hasn’t used. I hear from people all the time that they’re just gonna buy a foreclosure for their first property. Funny enough, I actually thought that that was how I was going to buy my first house. I want to make the distinction between a foreclosure and what we’re talking about buying now with a live-in flip, because you mentioned habitable, Mindy, and I think that’s a big component. Why is sometimes buying a foreclosure a misconception that people have?

Mindy Jensen (00:40:02):
Well, first of all, where are you buying foreclosures right now? There is nothing on the market. In most markets, the inventory is three or 12 houses, and they come on the market on Thursday. They are under contract on Monday. Anybody who is facing foreclosure, she just listed, because they’re going to get top dollar for it because there’s nothing on the market. Right now, that’s a common misconception because there’s nothing available. I do think that once the eviction moratoriums end, and people haven’t been able to pay their mortgages because their tenants are paying rent, we might see a lot more houses come on the market and start maybe I wouldn’t say flooding the market, but definitely picking up inventory just because I can’t continue to hold this house.

Mindy Jensen (00:40:46):
The market the past few years has been really, really hot, and trying to buy a foreclosure just isn’t going to happen. Sometimes when the house has been foreclosed on, the people who are being forced out are unhappy with that situation, and they may cause significant damage to the home. I have heard stories where people have flushed a bag of cement down the toilets, and now, all of the toilet lines are filled with cement. That is probably not going to be a super fun thing to go through. Copper was at all time high prices.

Mindy Jensen (00:41:17):
I don’t know if people are still stealing copper, but for a while, people were stealing copper out of the house, and all of your plumbing lines are copper. You’d go to turn on the water, and there’s a flood everywhere because there’s no supply lines. A foreclosure isn’t necessarily the best option for a first time home buyer. It can be. I bought foreclosure houses. My last one was in 2013. There’s just not a lot of foreclosures in a lot of places right now, though.

Scott Trench (00:41:42):
I would just say that the challenge is how do I get a good deal? Once we decided what we want, how do we get a good deal? That I think is the broader context [inaudible 00:41:52] that question. I think Mindy’s absolutely right and that, relatively speaking over the past 20 years, right now is probably not a big time for foreclosures, because property prices have been increasing, generally speaking, across most of the country. It could be different in various markets. I know San Francisco seems to have had a very bad year for housing prices, in particular with prices plummeting and those types of things.

Scott Trench (00:42:12):
You think that for the most part, foreclosures are relatively more rare, but still on the market, and I think pose some of the risks there. But when I think about getting a good deal, it’s about knowing exactly what you want, doing your research and looking at sold comps, understanding how you’re going to get that deal flow. Most people buying their first home were going to buy a property that’s listed on the MLS, their local multiple listing service. It’s going to be a property that is marketed for sale to many people. Foreclosures will be included in that, so there’ll be multiple sources of these types of deals marketed for sale.

Scott Trench (00:42:47):
I think it’s just about knowing what you want, building a patient pipeline, and then pouncing on that good deal, because good deals are not going to sit on the market for very long right now, so I think you need to be ready in advance of what you want and offer instantaneously when that good deal that you’ve pre vetted… I’m looking for the $300,000 properties in this part of town with three beds, two baths, X amount of square footage, X amount of yard space, that kind of stuff. When it comes on the market, I’m going to buy immediately, because it’s not going to last for two weeks. Let me make a cool common collective decision.

Scott Trench (00:43:18):
I have to make that decision ahead of time and react in real time, regardless whether it’s a foreclosure or coming on the market, because of another reason.

Robert Leonard (00:43:28):
The other difficulties with foreclosures is that typically, financing is hard to get, especially for a first time home buyer because financing, you need it. The lender wants it to be habitable, and a lot of times, a foreclosure is not, and so getting financing for a foreclosure can be a lot more difficult than people think about.

Scott Trench (00:43:45):
Yep, and have it habitable. I think that’s the great word is what does habitable mean? Sometimes, it can depend, so it can have an amorphous definition. But yes, you don’t want a property that’s in such bad shape. You can’t get conventional financing, particularly on your first property. That will spell a whole bunch of trouble. I mean, there are exceptions to every rule, but in general, that’s, I think, a generally unwise decision with that. My first property was a foreclosure, and it was habitable, but it did not have things like blinds on the windows, and finished sections of the property I had to do all that work. I was able to generate a large ROI on that purchase, but yes, it costs a lot more problems.

Robert Leonard (00:44:26):
The distinction there is you could get conventional financing, but you probably couldn’t do FHA if somebody. If listening to the show, that’s thinking that route too.

Scott Trench (00:44:33):
That’s right. I got an FHA loan on this property because it barely met the conditions for habitable on that. I actually had to tweak a few things to make it habitable before I could get to closing the FHA loan as part of the inspection objection.

Robert Leonard (00:44:47):
Just my first two primary residences, I did conventional, and then the third one I just bought, I did FHA. They were extremely strict. I was really shocked because I hadn’t experienced that before. There was some paint chipping on a deck in the backyard, and they wouldn’t even lend on it with FHA until it was painted. I was like, “Wow, they’re really strict compared to previous two loans conventional.”

Scott Trench (00:45:07):
That was not my experience seven years ago, but things could have changed. Yes. It might just depend on your particular appraiser as well, your FHA appraiser.

Mindy Jensen (00:45:18):
That was definitely my experience three months ago. When I was trying to help someone sell their house, the FHA appraiser kept coming back. What about this? What about this? I’m like, “Really? There’s nothing wrong with that. The light switch doesn’t have a cover. You know that’s like 25 cents at Home Depot, right? But okay, I’ll go get a cover.”

Robert Leonard (00:45:37):
Scott, to your point, I think it is something that’s changed, because my agent even told me, he’s like, “Listen, FHA has gotten a lot harder over the years.” He said, “I used to be able to do this much easier before, and now, I know we’re going to have all these issues, so let’s just get out in front of it,” which thankfully, we did.

Scott Trench (00:45:51):
The good news, if you’re listening, is that I think there’s plenty of options and alternatives to FHA. The big advantage for me with an FHA was being able to get a 3.5%, or I guess I used the 5% down FHA loan. I think you can just get a 3.5% down conventional loan nowadays, which would get you out of a couple of those thorny challenges. There are other options besides FHA. I’m learning something right here, and now, I didn’t realize how much stricter it seems FHA has gotten.

Mindy Jensen (00:46:18):
I was going to say if you can do a conventional loan, go with conventional because the PMI can come off after you’ve paid 20% down, whereas with an FHA, the PMI is there forever, until you get out of the loan. They are super, super strict. I think they have every right to be… Right now, as annoying as it is, they have every right to be because some of these properties are going to go into foreclosure, and they want to make sure that they are selling it as easily as possible. That’s unfortunate, but the government is backing these loans, and they don’t want to see another 2008.

Robert Leonard (00:46:52):
I was going to say it’s almost like they learned something from last time.

Mindy Jensen (00:46:56):
Almost.

Robert Leonard (00:46:57):
What’s interesting, though, we’re talking about there are so many competitive markets, and there is. If you’re going against somebody with conventional financing versus FHA, you’re going to have a hard time most of the time. In my case, I think I got a little bit lucky. I think I was the only offer on this property, and so it didn’t really matter that I was FHA, but I actually was able to use that FHA inspection as a negotiating piece against the seller. He had to fix all these things up at his expense before I could buy it, because I was the only buyer.

Robert Leonard (00:47:23):
If he wanted to sell that property, he had to fix these things, or he wasn’t going to sell it, and it’s going to go back on the market. For me-

Scott Trench (00:47:28):
Hey, man, it’s not me. It’s the FHA appraiser [crosstalk 00:47:30].

Robert Leonard (00:47:30):
Exactly, exactly. Hey, I’m not asking for these things. The FHA is, and if you want to sell, you have no choice.

Mindy Jensen (00:47:35):
As a listing agent, I had only that one offer on that house, and we had to do everything, because we didn’t have any other offers.

Robert Leonard (00:47:45):
I got a whole new heating system for free from the seller, $10,000 selling credit. It was great. They fixed all the paint, everything. It was great.

Mindy Jensen (00:47:52):
Awesome. As a listing agent, if I have two offers on the table, and one of them is FHA, and one of them is conventional, I am going to share my experience with the FHA loan that I had, that was such a disaster three months ago with my seller and say, “Hey, this is something you need to really consider before you choose this offer over that one.”

Robert Leonard (00:48:11):
That’s the big piece that I want everybody listening to take away too is if you have the option to do one or the other, you might want to consider conventional, just it’ll give you more negotiating power.

Scott Trench (00:48:21):
I guess it sounds like if you’re looking at a property that’s been sitting on the market for several months, then maybe it’s a good idea to use the FHA loan, because if there’s something wrong with the property, your FHA inspector will force you to confront the issue and those types of things.

Robert Leonard (00:48:36):
That’s exactly right. It’s situational. Use it to your advantage. People say, “Oh, I need FHA. It’s my first time buying a house, or I’ve already bought a house, I can’t use FHA.” Don’t be so strict on that. Think about the situation. Gauge where you are and the competition and everything that’s going into the transaction. Choose what’s best for you. I’ve done about seven, eight, maybe nine deals so far. Not all of them were primary residences, but they all had agents involved and lenders, and I’ve been able to see just how important each of them are and how much of a difference they make on how the transactions go.

Robert Leonard (00:49:10):
How do we choose the right real estate agent and lender for us? What should we look out for?

Mindy Jensen (00:49:15):
I’m going to take the lender one first, because I feel it’s a little self-serving to be like, “You should get an agent that’s just like me.” With the lender, you want somebody who could do what they say they’re going to do. If they say they’re going to close in 30 days, they need to have a track record of being able to close in 30 days. I have a go-to lender right now. He can do a 15 to 21 day close. The first time he told me this, I’m like, “We’ll see.” 21 days later, I had a VA loan closed in 21 days, which is unheard of, because this guy knows what he’s doing. He knows how to work the system.

Mindy Jensen (00:49:49):
It’s all legal and following the rules and all of that, but he knows how to work the system to get the deal done on time. That’s way more valuable than somebody whose office is down the street from me. Yes, he also has amazing rates, but if you’re trying to do something, especially in this crazy market that we’re in right now, if you’re trying to do something that isn’t a traditional 30-day close, 20% down conventional loan, go with somebody who has a proven track record, rather than the guy who’s an eighth of a quarter of a percentage off on the rate.

Mindy Jensen (00:50:22):
You should compare apples to apples, and, “This is his rate. This is his closing costs. This is his…” all the little fees and whatever, but when it comes down to it, you need somebody who can do what they say they’re going to do. That can be a little difficult to find. But once you find them, treat them like gold, because they will watch out for you, and do everything they need to do to help your deal close too.

Scott Trench (00:50:44):
I think on the first time purchase, I would agree with Mindy with the caveat that you’re probably going to be doing something pretty normal with your first home purchase. You’re probably going to be doing a conventional loan or an FHA or something like that. For that, I think that the rate is really… and the terms, reputation is important with that, is really like I would say number one for me, and then the reputation and this service is maybe number two, but for where I and Mindy are now and maybe you are, Robert, with buying multiple properties and having these types of things, I do it all through one lender who gives exceptional service. That is worth way more to me than shopping on a little bit on the rate front.

Scott Trench (00:51:26):
I think there’s a blend there to go shopping around with that on some of those.

Mindy Jensen (00:51:31):
I was going to say you should also talk to your agent about lender recommendations, because when people are asking me, “Hey, do you have a lender?” Yeah, I’ve got a great lender. Here’s why he’s great. When you ask your agent why they’re recommending somebody, listen to what they have to say, because if they’re just, “Oh, this is the guy that did that one loan for me this one time.” “Great. That’s a super awesome, solid recommendation.” When you have somebody who says things like I do, he has never missed a deadline for me. That’s really important.

Mindy Jensen (00:52:02):
That’s way more important than being in a tiny bit better on the rates, which he also is always awesome on. I think you’re right, Scott, that the first time a home buyer is going to be buying a regular property, they’re doing a regular transaction, so you would need to talk to your agent and get a regular lender that they can trust.

Scott Trench (00:52:25):
Then on the agent side, I would say that Mindy and I’s approach to buying the first home, what is the agent’s dream clients? It’s someone with a great income, great credit, who is in a real big hurry to buy a home before their lease expires, creating a very artificial deadline, and is going to fall in love with the first property that they see. Listen to [inaudible 00:52:46], if you buy anything we’ve been saying during this show, you’re going to look to the agent like someone who’s, “Yeah, I got good income and good credit.” Of course, but he’s not really in a big hurry. He’s going to wait and be patient to find that right property, knows exactly what they’re looking for and is buying a little bit below your means.

Scott Trench (00:53:01):
That appears like more work and less money to some agents potentially. I think what you need to look for is you need to interview a couple agents, and make it clear like, “Hey, I am willing to be patient on this search, and wait for that great deal to come on the market. I know exactly what I’m looking for, and I’m ready, willing and able to buy that if you can produce that. I’m not going to sit here and make you show me 50 properties, and waste your time, but I’m going to really buy when something is that three to 500 or a 1,500 square foot property in Denver in these neighborhoods comes on the market, bring that to me, and we’ll do it.”

Scott Trench (00:53:38):
But it might be three, six months before that property hits the market, because there’s only been a few of them sold in the last six months. I think that’s the mentality to go into with the agent, and ask them questions around that, “Hey, are my expectations realistic? I looked at this, and I saw these have sold? Is that going to happen in the future? Do you work with investors at all, and have that mentality? Can you validate my assumptions around future rent or future appreciation potential for this property? Do you work with first time home buyers frequently? Do you know the ins and outs of what people are doing?”

Scott Trench (00:54:10):
If you’re working with a newer agent, that can be fine as long as they have a mentor that can help answer some of those questions, and might be willing to invest more time with you. If you’re working with the busiest agent in town, you gotta know that you’re going to get less service. They probably will have more answers handy for you when you have certain things come up during the process. I think there’s plenty more to that, but I think that that’s my high level response to the finding the right agent question.

Mindy Jensen (00:54:34):
I want to jump in on what you just said, Scott, and say that the question, “How frequently do you work with first time home buyers,” is an important question because it is so easy to have done this so many times you forget the basics, or you forget to explain the basics. I try really hard when I am working with people that I know are first time home buyers to explain the entire process. When you make an offer in Colorado, I’m filling out an 18-page document. I have filled it out probably, I don’t know, 12 million times. I know all the things. I gloss over the things like there’s a big wall of text.

Mindy Jensen (00:55:11):
I know what it says. I don’t need to read it anymore, but when I know that you’re the first time home buyer, I want to explain that to you. You want somebody who will answer your questions. There’s no such thing as a stupid question. If you have a question about the process, that’s a big deal. Ask your questions. But if your agent is always like, “Oh, don’t worry about that. It doesn’t matter,” that’s not the right agent for a first time home buyer. You want somebody who will take the time to explain it to you, because this is a huge deal, and you need to treat it like the important thing that it is.

Scott Trench (00:55:41):
Be wary of the title top agent. The top agent in your market is the person who processes the most volume, sells the most expensive houses the quickest. That does not necessarily mean that they’re the best service or whatever. The way I read that, frankly, is the top agent in your market is the one that is helping people make the biggest financial decision of their life in the most rapid timeframe possible with the most amount of clients. That’s not necessarily what I’m looking for when it comes to service for my agent. It’s not a bragging point.

Scott Trench (00:56:13):
I want somebody who’s not doing this for the first, second or third time, especially if they don’t have like a great mentor to help them with higher level questions, but the busiest agent in town is probably not your best bet for a lot of this stuff.

Robert Leonard (00:56:26):
In the context of everything that we’re talking about today, being a first time home buyer, where does house hacking play into it?

Mindy Jensen (00:56:33):
House hacking is huge for a first time home buyer. There’s caveats. If you’re married and have kids, and you’re just discovering this, maybe that’s not the best choice for your family, but it can lead to enormous wealth generation, just by being slightly… I don’t want to say uncomfortable. What’s the word? Out of the ordinary. Craig Curelop is actually the author of a book called House Hacking, and he bought a house and lived… It was a one-bedroom house, and he slept on the couch, and Airbnb the bedroom. He hacked his house in that way. He made enough money that way to buy another property where now he had a whole bedroom to himself, and live with roommates.

Mindy Jensen (00:57:15):
He used that to buy another property. I think four houses in, he paid off $86,000 in student loan debt. That’s enormous wealth generation. Now, he’s got no debt and four houses. He’s got a lot more houses now, but that can be really huge, but he was also… What was he, 23 or 24, when he started that? He’s not married. He doesn’t have a family. He doesn’t have all these other things to consider. There’s a lot of different ways to hack your housing, though. You can buy a duplex and not have any roommates while still having a property that’s helping pay your mortgage. I consider live-in flipping to be house hacking as well.

Scott Trench (00:57:50):
Everything’s a spectrum. House hacking is on the far end of the spectrum towards optimal wealth creation, right? It’s a very, very good wealth building tool. It allows you to live for very low cost or free or even build wealth. It literally turns you in from housing being an expense to you just making money while living as part of that if you do it right. It’s extraordinarily powerful. I did it for seven years. I think it’s an optimal approach. That said, we have a book on house hacking by Craig, which I think if you’re interested in that, that’s going to really touch on that. Our book does touch on house hacking, but we also, I think, acknowledge in this book that that’s not really the meat of what we’re talking about here.

Scott Trench (00:58:28):
We know that for many people, they’re not going to want to house hack. That’s not going to be a desirable outcome for them. It’s certainly an optimal, and it will be better financially than buying a house, a single family home with just you and your family living in it from a financial standpoint, but we’re probably more in line in our book and what we’re discussing today with the [inaudible 00:58:49] that they, “Hey, how am I buying a single family home that me and my family are going to live in?” Well, yes, the option to house hack is presented and is there and is optimal, but it’s a little bit more extreme than many people might be willing to do in their first purchase, especially if they’ve got a family, kids, those types of things.

Robert Leonard (00:59:05):
If anyone listening today wants to hear more about Craig’s story or learn more about the house hacking strategy, we had Craig back on episode four. You go back and listen to that episode. When you guys think about when you were just starting to get involved in real estate, whether it was as an investor or just a home buyer, what do you know now that you didn’t know back then that would have helped you grow your wealth and portfolio exponentially faster?

Mindy Jensen (00:59:30):
Don’t buy condos. When I had my condo, my mortgage payment was $410 a month because interest rates were 7%. My HOA dues were $200 a month, and then the next month, they went up to $400 a month. I instantly doubled my HOA payment simply because I didn’t know what I was doing. I have never owned a condo that didn’t come with a special assessment. I know a lot more about it now, but I don’t… I’m so burned by it. I don’t ever want to buy another condo. Don’t buy a condo, and learn your market. Be really, really aware of what a house is selling for in good condition, and in, “I can fix it up condition.”

Mindy Jensen (01:00:13):
Be aware of what your skills are, and buy that ugly house and fix it up.

Scott Trench (01:00:19):
Aside from knowing that the market would have boomed the way it did over the last seven years, and just buying and leveraging, I think more than that, I think I would have focused more on… This is really related to my investing journey, specifically. I would have focused more on laying a better operating infrastructure, because you buy a couple houses. They’re spread out. They begin getting in different parts of the city and those types of things. Focusing on having great property management, making sure that everything is really tidied up, there’s a good maintenance schedule.

Scott Trench (01:00:48):
You’re looking at all of the big systems of the house on a regular basis, those types of things. Those really add up for an investor over time, and would apply to a homeowner as well. It can seem petty or not important at the time, but they can cause you some big headaches downstream as I found out.

Robert Leonard (01:01:05):
Mindy, Scott, thank you both for joining me today. For those listening that are interested in learning more about you, your book and all the concepts that we talked about today, where’s the best place for them to go?

Mindy Jensen (01:01:17):
BiggerPockets.com. I am all over the forums at BiggerPockets. You can find me on Twitter at Mindy@bp, M-I-N-D-Yatbp. I’m on Instagram, but don’t send me messages there because I don’t use it. I’m all over BiggerPockets. I’m there all day every day. I love talking about real estate. It’s my favorite.

Scott Trench (01:01:39):
You can find me at BiggerPockets as well. I’m on Instagram at @scott_trench, and then you can find our book, First Time Home Buyer, anywhere books are sold, but specifically, you can buy that on BiggerPockets. You can just go to our bookstore, and you’ll be able to see it right there.

Robert Leonard (01:01:54):
I’ll put a link to the new book as well as BiggerPockets and Scott and Mindy’s social profiles in the show notes below, so anybody interested can check those out there. Guys, thanks so much for joining me.

Scott Trench (01:02:07):
Thank you so much for having us. We appreciate it.

Mindy Jensen (01:02:09):
This is a lot of fun, Robert. Thank you.

Robert Leonard (01:02:11):
All right, guys, that’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (01:02:17):
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