Lifetime Real Estate Advisors

05/02/2024

I need a favor... I just started a YT channel about providing financial clarity to the real estate decisions we make. It's not branded for my mortgage business - it is simply there to fill some of the void in financial education in our public systems.

Financial stress is VERY real. It is the leading cause of divorce and a major contributing factor in suicidality. What's darkly ironic is that it is usually avoidable.

Our children and grandchildren deserve financial security. Please subscribe - this helps the information reach more people.

Welcome to "Lifetime Real Estate Advisors" Traditional financial professionals tend to focus on wealth management within the context of the stock and bond ma...

12/24/2023

Warning: the WSJ is now placing advertisements disguised as articles! (referenced below)

On December 11th, the WSJ wrote an ad-ticle (cute, right?) stating that the economics of owning a home didn’t make sense anymore. Then, on December 22nd, they placed another ad-ticle about the glories of renting forever! How convenient – they’ve found a solution for us, and just in time for Christmas! We should have never doubted them.

The article on December 22nd, entitled “The Rise of the Forever Renters” states some statistics (how else would it look like an article?) and then cites a few seemingly financially successful people who have chosen to rent for the rest of their lives.

In the meantime, what are massive investment funds doing? Buying these very same gingerbread houses and renting them to Hansel and Grettel, who will discover only too late what trap they’ve been lead into. That story is for kids, so the siblings escape, but in the real world…

The WSJ does not bother to cite anyone in their 60’s or 70’s who is struggling to keep up with inflation and for whom a paid off home would be a financial miracle. That doesn’t fit the narrative, and it’s depressing. Let’s talk about battery-powered interchangeable light fixtures instead!

They defend the “relatively low price for what I want” idea as if monthly payment is the only thing you should be accounting for.
I’d like to offer just one little piece from the other side.

Let’s start with the 4% rule. This generally accepted rule roughly states that you should be able to comfortably draw 4% from your portfolio in retirement in order give yourself annual increases to keep up with inflation and withstand market uncertainty.

Another way to think about this is that for every $1,000/mo ($12,000/yr) you want in retirement income, you need $300,000 in savings. Yes, you read that right. Income from investments is expensive.

So, if you’re rent is currently $3,000/mo, and you think that’s a “relatively low price for what you want”, then carefully think through what you want. If your rent increases by 3.5%/yr, (lower than the national average since 1948, which is 3.65% and is surprisingly steady over decades, according to the Federal Reserve Economic Data from St. Louis), then your rent will be $10,000/mo in 35 years.

Does that sound counter-intuitive? It is, which is why people still fall for this trap to the benefit of real estate investors. Now, I don’t know if rent will increase at 3.5% for the next 35 years, and neither does anyone else, but if it doesn’t, I’d take the over on that bet in Las Vegas every day of the week. So, what if it’s a slightly higher 4% annual increase? Then rent will be $11,838/mo.

So, if renting will cost you $10,000/mo in 35 years when you want to retire, then you’ll need an extra $3,000,000 in retirement savings to pay that monthly bill. In your 401(k)? No, silly. You’ll need an extra $4,000,000 (or so) if you want to pay that monthly bill from your 401(k), because our living expenses are after-tax expenses!

But what about the cost of purchasing a home, you say? Purchasing a $500,000 home (I realize this figure is appropriate for some readers and ridiculously high/low for others) will cost you about $1.5M over the next 35 years. This includes the down payment, taxes, insurance, interest, principal, and maintenance. And other than the principal and interest payments on a 7.5% mortgage with a 5% down payment, the expenses are being calculated to creep up with inflation at 3.5%.

Oh, let’s not forget… after the mortgage is paid off, your living expenses drop drastically. That’s kind of important.
Ok – $1.5M is a lot! But unless you’re willing to sleep on the sidewalk, your “relatively low price for what I want” rent has cost you $2.4M over the same 35 years, assuming only 3.5% rent increase.

Here’s another important detail: if you purchase a $500,000 home, and it appreciates at 4.5% over the next 35 years, you now have a cute $2.3M asset on your balance sheet.

And before someone makes the hollow argument that the home you live in isn’t an asset, please consult any family who has used equity in the home of a parent to fund medical needs, nursing home residence, grandkids’ educations, or anything else. Anyone who tells you equity in a home isn’t wealth hasn’t thought life through properly.

There is nothing unethical about renting, or even renting for the rest of one’s life. I do find it unethical, however, to write an article in a popular financial publication urging people to do so with barely even a token strawman argument from an opposing side.

You can find the WSJ article here:

Americans who would traditionally be homeowners are instead renting. They’re sparking new kinds of neighborhoods, changing savings patterns—and even buying different light fixtures.

12/12/2023

It’s as if the Wall Street Journal and the New York Times are selling their credibility for some clickbait traffic.

On December 11th, 2023, the WSJ published an article (linked in the post below) written by Gina Heebs entitled “The Math for Buying a Home No Longer Works”.

As with David Leonhardt’s article in the New York times on December 1st, I’m not ready to believe Gina is trying to deceive anyone, but the New York Times and the Wall Street Journal, as institutions, should be held to a higher standard.

First of all, it is intellectually lazy to cherry-pick a graph that dates back to 2007, just prior to the worst real estate crash in the lives of everyone reading. There is so much wrong with this.

Second, it makes every financial professional worth their salt cringe when someone mentions the “total cost of a home” over 30 years. Money and time always have and always will have an inseparable relationship.

It’s the equivalent of saying a $20 meal cost me $200 because of what it could have become had I invested it over 30 years. Then don’t eat, I guess? Money has a unique value in the time it is measured. You cannot add today’s dollars to dollars accumulating over the next 30 years and call it a “total cost”. It’s an irresponsible oversimplification, and if Gina doesn’t know this, then the WSJ certainly should.

Third, this obsession with the “average” home price when discussing first-time home buyers needs to stop. If you purchased an average home or better for your first home, congratulations. The rest of us started with what we could afford when we were just getting started. Most of us didn’t get the “average” until much later.

And don’t forget that the average home is now bigger and nicer than the average home in the United States has ever been.
Yes, it is tough to purchase a home for the first time. But if you think you’re avoiding the cost of living indoors by paying rent to a landlord, you will struggle financially and in your economics classes. The cost of a good or service is always borne by the consumer. The earlier you learn this lesson, the better.

Gina also mentions that there is just not enough housing to go around. Additionally, she mentions that rents are on the rise. Both are objectively true.

Here’s where I need some handholding, Gina. Are you saying there isn’t enough of something everyone needs, and recommending we not purchase it for ourselves? You’re claiming that renting will continue to rise (of course it will), but I should continue renting? Am I being punked?

Here’s my advice to my children and anyone else who wants financial independence eventually.

Financial pressure is real. It is something you must take seriously. Rent makes up 32% of the Consumer Price Index (CPI), and unlike certain technologies, entertainment sources, and other luxuries, you can’t live without housing.

You must sleep indoors. You can solve this problem on a monthly basis for the rest of your life and watch that cost grow relentlessly. Or, you can choose to bite the bullet, get that monthly expense out of the jaws of inflation, and own something.

You’ll be surprised how soon rents around you will cost more than your cost of ownership.

You’ll look back with gratitude for the hundreds of thousands of dollars in equity, too.

You’ll someday notice the end of your mortgage payments approaching and get a wild sense of excitement as you imagine the thousands of dollars each month that will appear in your budget.
Still skeptical? Ask anyone you know in or near retirement about the value of homeownership in allowing them financial room to breathe? If they never bought a home, they will likely deeply regret not doing so. If they do, they’ll likely tell you they wish they’d bought a home sooner.

It’s difficult to imagine otherwise intelligent people quibbling about this, least of all a writer for the Wall Street Journal.

It’s almost as if massive institutions are investing in residential real estate (which is alarmingly true) but want us to believe renting for the rest of our lives is a good decision. It’s almost as if these massive institutions also write newspapers.

What does it take to buy a home in the U.S.? A lot more than it did before the Federal Reserve raised interest rates.

12/08/2023

12/05/2023

Thank you, Monica Wilson Graves, Alex Kimbrell, and Jerad Larkin for hosting this event tomorrow!

Perfect for people looking to buy something in the mountains and for agents looking for resources in the resort towns in CO for their clients!

Eventbrite brings people together through live experiences. Discover events that match your passions, or create your own with online ticketing tools.

12/03/2023

Here's another example of why institutions struggle with public trust. They keep shooting themselves in the foot.

This NYT article is a good example of taking a hot topic and capitalizing on it by having someone write about it who clearly does not understand the topic at hand.

The article is about renting vs owning, and there is a fundamental error that not only misleads readers, but causes the wealthy to get wealthier at the expense of those who don't know better.

I left a very comfortable 18-year career in finance to work in real estate because I felt I had something to offer. I'm not parroting real estate slogans.

I began working in the real estate industry as my children were becoming adults, and I realized the MOST CRUCIAL financial decisions they will ever make are about the REAL ESTATE in their lives!

🔥 🔥 THE BIG MISTAKE 🔥 🔥

The NYT (and MANY other people) are analyzing the housing market like they'd analyze the stock market. This is SO WRONG.

This can have some utility if you're deciding whether or not to INVEST in real estate, but that is not the point of this article.

This article is talking about having a roof over your head. Here is the difference between analyzing housing vs the stock market: You MUST pay for housing, or you will live outdoors. The question is whether you're buying that home for yourself or for your landlord.

Try this little thought experiment - what if you HAD to have stocks in your possession at the end of any given day or you'd sleep on the sidewalk? You'd have two options, you could purchase the stocks, or you could borrow them from someone who has more than they need for a fee (RENT). Of course, there's no such market for this because you don't really NEED stocks, but that's the point, so hear me out.

In a pinch, renting them could make sense - sleeping on the sidewalk is a pretty lousy option.

But it would NEVER be a reasonable solution to the larger problem! You'd figure out a way to buy what you needed to guarantee you didn't have to give a third of your income away each month to avoid sleeping on the sidewalk.

We often seem to get the QUESTION wrong. The question isn't, "Is it a good time to buy a home?" The question should be, "Is it a good time to give a third of your income to a landlord so I can sleep indoors?" That seems like a much easier question to answer: NO!

Clearly, there are times in our lives where renting can make sense, but it should almost always be based on the temporariness of the situation. If you think you will be moving in less than 2-3 years, then renting could make sense.

But because you think renting is better for your wealth? That is insanity.

And this pervasive idea will put money in the pockets of already wealthy investors at the expense of the scared and uninformed.

Posting the NYT article below:

We explain the state of the housing market.

11/23/2023

Happy Thanksgiving!

🦃✨ Gratitude is the attitude, and we're serving up a feast of thanks this Thanksgiving! 🍂🍁

Wishing you a Thanksgiving filled with love, laughter, and the joy of cherished moments. From our family to yours, may your day be blessed with all the things that make your heart truly thankful.

What are you thankful for today? Drop your gratitude below and let's create a thankful thread that warms the heart! 🧡🌽

11/20/2023

Join us for an awesome day of marketing tips, continuing education, and a delicious lunch, exclusively for NOCO Realtors!

11/14/2023

Embrace the Journey: Celebrating Every Step as a Success! 🌟