In this special episode of The Same Day Podcast, mortgage lender Alfredo Madrid interviews Yonatan (Yoni) Schmidt, the Regional Vice President of Sales and Marketing at Keyrenter Property Management, about the details of buying and renting homes. Yoni explains the importance of a budget for first-time homebuyers, how his upbringing led to a career in real estate, and how real estate prices and interest rates have fluctuated.
Renting Versus Buying: Determining the Best Path Forward
Alfredo Madrid is the Regional Manager of The Mortgage Link, Inc., a full-service lender providing various mortgage solutions. In his role, he leads a team of highly skilled professionals who provide clients with an exceptional home financing experience. With over a decade of experience in the real estate industry, Alfredo has ranked in the top 1% of lenders in the nation for the past seven years.
Here’s a glimpse of what you’ll learn:
- Yoni Schmidt’s upbringing and entry into the real estate industry
- Key considerations for buying versus renting real estate
- How to build credit to increase your buying power
- Why renters must provide employment history
- Advice for home buyers: buy down your interest rate
- Yoni addresses real estate pricing and interest rate trends
- What incentives can first-time homebuyers leverage?
- The importance of developing a budget when purchasing a home
In this episode…
When browsing the real estate market, one of the first factors people consider is whether they should rent or buy. This decision often depends on the individual’s short- and long-term goals and credit and employment history. How can you evaluate the renting and buying requirements to make an informed decision?
According to real estate veteran Yoni Schmidt, if you lack credit, you may want to consider renting initially and develop goals to purchase a home in the future. To establish or rebuild credit, maintain smaller balances on your credit cards and avoid making large purchases to mitigate debt. Additionally, the rental market emphasizes consistent working hours, so verify any gaps in employment history and compile your tax returns before renting. When you’re ready to purchase your first home, Yoni recommends buying down your interest rate to reduce monthly payments. First-time homebuyers are often incentivized to purchase properties from builders with a price reduction of up to $40,000.
Resources mentioned in this episode:
- Alfredo Madrid: Website | LinkedIn
- Keyrenter Property Management
- Keyrenter Property Management in Tulsa | Oklahoma City | Arkansas
- Keyrenter Property Management email address: [email protected]
- Yonatan Schmidt on LinkedIn
Sponsor for this episode…
Keyrenter Property Management:
This episode is brought to you by Keyrenter Property Management.
Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.
The team helps clients build wealth while taking the headache out of property management.
That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.
To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].
Episode Transcript
Intro 0:05
Welcome to The Same Day Podcast where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.
Alfredo Madrid 0:20
Have Yoni Schmidt here, and super excited to have him here because he’s a very knowledgeable real estate agent, investor, property manager. I mean, you if it’s in real estate, he’s done it and he’s doing it. Right. Could you tell us a little bit about yourself your background, what you do? Basically, what takes up your day? Yeah,
Yoni Schmidt 0:41
sure. Thanks for having me here. Alfredo. It’s been a long time I’ve been trying to think about, you know, when you and I met for the first time, and I wasn’t really sure. Let me make sure that
Alfredo Madrid 0:53
Well, we did a transaction together. And we went and had coffee at Cirque remember, down on like, Sixth Street down there. I
Yoni Schmidt 0:59
do remember that called know, the pearl district, the pearl district. That’s a great area to invest in this. Yeah. So I just sold the house on Pearl for an institutional investor out of Austin, for two for South Troost. And really interesting stuff that’s happening around that
Alfredo Madrid 1:18
area. Yeah, that’s actually something I’m really excited to ask you about for people listening in here is just what kind of opportunities are out there. Yonis actually a really young guy that’s already like way into having a big time real estate portfolio, managing a big real estate performing for the company that he has. And so I’m excited to ask those kind of things. Yeah,
Yoni Schmidt 1:36
and I don’t manage, you know, any any of the properties, really, I guess, maybe a few for myself. And I’m hearing they’re coming in and out of the operation side and more on the sales side, potentially a question. Yoni Schmidt born and raised in Jerusalem, Israel, served in the Israeli Defense Forces for the mandatory three years I was in the Old City of Jerusalem had really inspiring and meaningful service in the IDF. And I moved here, basically, two days after I was honorably discharged, from there, moved to Florida after a little trip and didn’t like what I was doing there in sales. So came to Tulsa, Oklahoma, where my grandfather was and had some family here, he was working three jobs simultaneously, I think I was crunching about 80 hours a week, just like trying to save up as much as I can. The real, the real kind of goal was to save up as much as I could meet my friends at the tip of Argentina in Oshawa, and then travel for about a year, which is kind of a, you know, Israelis do after the army. And that didn’t really pan out. I had an opportunity. It was like a now or never situation of, hey, you can go to school, pretty much for free. And I just hopped on it.
Alfredo Madrid 2:56
What do you mean, you could go to school for free? Because you served? No,
Yoni Schmidt 2:59
actually, because my grandfather is a generosity. Oh, gotcha. You know, something that, you know, has been a constant theme in my life and super grateful for is
Alfredo Madrid 3:10
your grandfather, somebody that’s like a mentor to you or was a mentor?
Yoni Schmidt 3:14
In a sense, maybe even without even realizing he owned real estate in Tulsa for real long time. I still drive by those duplexes that he used to own right here on 61st. Between yellow and Sheridan. Yeah. And I always think about, oh, man, I wish I should have bought those with, you know, from my grandfather. But he did an owner finance on that, and pretty well.
Alfredo Madrid 3:39
So how did you get into real estate here?
Yoni Schmidt 3:42
So I think I’ve always had a natural kind of curiosity with real estate. My father was, you know, doing some stuff in real estate in real estate in Israel. He he’s actually a licensed real estate agent in Israel. So if anyone ever needs a place but, you know, he got me into real estate from a young age. You know, I was very fortunate at the age of 17 to get my hands on my first property through the help of my father and you still own that property is his attorney. Yeah. That’s awesome. Yeah. It’s been great. It’s downtown Jerusalem, Israel. And, you know, ever since then, I’ve kind of always, always loved real estate didn’t know that I ended up in real estate. I always knew that I wanted to be a businessman. I just didn’t know what went to you studied finance and international business, graduated, worked in private equity and then segwayed into real estate. And then, you know, from here to there, getting licensed selling homes, buying homes, helping buyers and sellers working for another very large multifamily operator, here in town, about three to 5000 Doors. Maybe there are 5000 now but I think when I started they were at 3000 or 5000 doors now. Yes, mostly syndications, though, CEO has been you know kind of doing syndications and taking GP positions and opening it up for LPS worked as the operations manager there for a while, also while selling real estate. And then I went to work for an individual who owns some real estate here in Tulsa and Oklahoma City in Richmond and Roanoke, Virginia, worked for him managed an apartment complex at fourth and Elgin, the east and Village Apartments and in Tulsa, that used to be in 1928, the original Chevy dealership here in Tulsa was overhauled and converted into a larger partner apartment complex at three, kind of like industrial, modern industrial loft style apartments. Yeah. That was like an $8 million project turned into 13, because of some, you know, GC issues. And basically, you know, pretty, pretty interesting deal, though. Oh, really enjoyed my time at Eastern at Eastern village.
Alfredo Madrid 6:20
Yeah. So a while ago, I said, you know, you manage properties, or you said, No, I don’t do that part of it. What did you mean by that? So
Yoni Schmidt 6:28
my responsibility, and when I started with, you know, Keyrenter which is the current company that I’m with, when I started with Keyrenter, I had called up Mat Zalk. And we were talking and he had just launched his Oklahoma City operation. It was like the start of the pandemic. And I thought, Oh, my God, this guy’s crazy. Right? Like who, who’s like expanding their business in times of such uncertainty? Yeah, I was like, I called them up. And I said, Hey, is now really the time to like, go after this new opportunity. He’s like, yes, of course. Now is the time to be helping people exactly the time. And so I thought about it. I thought, okay, yeah, maybe, maybe that’s true. And I knew Oklahoma City, I lived in Oklahoma City. So I said, why don’t why don’t I go head up that shop because he was at like two doors there. And within 18 months, we scaled about 600 doors Well, in the Oklahoma City Market. And then Mat said, oh, cool, good dude, that in Northwest Arkansas, we came into Arkansas and learned some hard lessons that, you know, the two markets are not similar in in any way. Northwest Arkansas is more of an accidental landlord type of market, whereas Oklahoma City is really ripe for investments. And, you know, people pursue it more, more intentionally, right. So, you know, Mat decided to acquire a business and merge it into Keyrenter. We grew that market, through an acquisition, and now we’ve been growing organically establishing our name or reputation, the brand building awareness. And then from there, we headed into which job. And so now today, my role is to head up the sales operations for guarantor property management, basically PMC that’s the Keyrenter that operates four franchise markets, Tulsa, Oklahoma City, northwest Arkansas, and Wichita. And I oversee three business development for business development managers, one on each market and a couple of sales associates who actually sell the assets that we then manage.
Alfredo Madrid 8:38
So needless to say, you have a lot of experience in that rental game, right? Like, both both giving value to the investor, but also taking care of the tenants, right? Like you. In order to be successful in your line of business, you guys had to be able to do both right and serve both. And I’ve always known you as someone that is interested in giving value first. As a matter of fact, we have a client right now that you’re helping out and you actually stand to make zero commission on it. But I don’t see any difference in your game, I don’t see any difference in the value you provide to that person. You know, I feel you’re just as motivated. So what I want to ask I’m leading to and this is what the podcast was originally, like we want the information we want to get to everybody is what it what do you what’s a different motivation? And what’s the difference to somebody knowing if they should be renting right now, or they should be buying, in your opinion, from your point of view. Because you guys get applicants all the time. And you must have a way to filter them, approve them, that kind of thing. So let’s start at the rental process, and we’ll graduate into buying but I want to know like why would somebody go? I should rent right now. Or I should buy you’re obviously not in the game of convincing people not to rent right but, but I also think you are in the game of educating people and doing what’s best for them. Yeah.
Yoni Schmidt 9:55
Yeah. And that’s kind of the philosophy that I take with sales as well. Well, is, you know, when we go through the discovery call with new clients and new owners, and this is how it should also be with new tenants, right? Is we don’t, we don’t start with our services and our pricing, we actually just have to ask the questions to to help them make the best decision for them rather than, you know, look for an opportunity to benefit from it ourselves. That’s overall our philosophy. It’s like the Go Giver givers gain type of philosophy where, you know, it doesn’t matter. If you provide value with no expectation of anything in return, in some way, shape or form. You know, I think that value will come back to you, right? Asking a tenant, I guess, you know, in and can you repeat that question? I
Alfredo Madrid 10:57
just want to know why somebody would be there at a crossroad should I buy? Should I rent? Right? And they don’t even know if they have the option to buy or rent it. They’re just thinking like, what path? Should I take? In your opinion? What? What should they consider when renting? I mean, there’s obviously situations we’re all in that renting for now should be better. Like it just loses weight. And there’s situations why let’s go ahead and purchase right now, especially in a market like Tulsa, what what would you say? Is that what advice do you have for somebody at that crossroad at that fork in the road?
Yoni Schmidt 11:29
Yeah, I think the first and most important question to ask them is, what are your goals? Right? I mean, are your goals to become a home owner? Do you understand the implications of being a home owner? And you know, what it takes? Right? There is it’s a lot of responsibility, there is a lot that can go wrong, and you have to be prepared for those things. Right? Are you prepared for those things? How can you be prepared for those things? Those are the questions that I would ask someone who’s at that fork in the road, you know, saying should I go rent? Or should I go buy? Right? Are your goals to own real estate? If they are, then you know, my personal perspective is that everything is cheap in the rearview mirror. Right? So it’s almost like, it could be that it’s almost always the right time to buy. Right? It doesn’t necessarily mean that, you know, you’re going to get the best deal. But real estate tends to be very forgiving in the long term. Sure. And so acting on it, you know, in that moment, is probably the best thing that you can ever do for yourself, if that’s your goal. Yeah. Well, yeah.
Alfredo Madrid 12:41
I mean, what goes up must come down, not an economic principle. Right? Like, it’s not, it’s not, it’s not something if you look at the values of homes in the last 60 years, whatever, it’s up into the right, it just always has, and it always pretty much will be at some point now, will there be dips? Yes. We have 2008 2009 word dibs, maybe here recently in the last few years, depending on the market. But ultimately, it’s always going to be trekking up, right. Yeah,
Yoni Schmidt 13:10
I agree. And I think that, you know, here in Tulsa, Oklahoma City, generally in the heartland, we are shielded from those extreme fluctuations that you experience on, you know, like in New York, or Miami or anywhere in Florida, you know, anywhere on the West Coast. We are we are pretty shielded even in 2000 789. Right, during the financial crisis, in, you know, the mortgage backed security crisis. Tulsa, for example, was pretty steady. Yeah, yeah. Is
Alfredo Madrid 13:42
it? Is it just a stigma that somebody that’s renting might not have the credit to somebody that’s able to buy? Or are you guys seeing pretty, pretty equal average credit scores when somebody’s with your tenants that you see with a lot of the buyers that you help? Yeah,
Yoni Schmidt 13:57
I mean, that’s a great question. I don’t see that many applications from time to time I do. I would say that, regardless of your credit, there is likely a path forward, you just have to seek it, right? Sure. Because there are, there are companies out there that can help you restore your credit. If you come to a property management companies like us, and you say, okay, my plan is to buy something, you know, within a year or two, and I’m saving up and I want to rebuild my credit, and it’s going to take a little bit of time. You know, one of the things that we do at Keyrenter is we report to the credit bureaus that you know, you’ve paid your rent, so that actually helps you boost your credit score so that you do have a pathway to
Alfredo Madrid 13:57
so you guys are consciously helping people get into better positions, even though it may cost to attend it. Definitely.
Yoni Schmidt 14:49
I mean, I think that kind of comes down to like the heart of what we do, right? We want to provide quality housing for quality people. Right? That’s the that’s the ultimate goal is to have good products, good assets, good services, and help people improve their life in general.
Alfredo Madrid 15:10
And, you know, I’m obviously very biased on this, because I’m the lender. But I truly believe and I believe it, whether I’d be a lender or not in the state of Oklahoma, with the prices that we have in our tax structure, the way we have it, I think everyone that’s going to plan on being here three years or more, should always have a game plan on how to purchase a home. Because property taxes are low. Okay. Prices are not bad compared to the rest of the nation. Right? We we we charge a state tax instead of a property tax. So I think that you’re always going to be better off spending your money on buying or renting for those reasons. Yeah, I mean, you know what I mean, so like, everyone should have some sort of game plan on how they’re going to get there. You may be a year out, you may be two years out, it doesn’t really matter. But you have to be aware of it. And you have to be working on that game plan so that when it does come time, and you are in the market, you get the best terms possible. Yeah,
Yoni Schmidt 16:10
I agree. I think homeownership is, is a vehicle. It’s a great vehicle to build wealth, and it’s a great vehicle to achieve financial freedom. Yep.
Alfredo Madrid 16:21
So in the name of helping some of maybe your tenants or any tenants out there renting, I’d like to just a little bit of go over some things you can be working on right now. First of all, like we just talked about his credit, right? With credit you don’t, you want to pay something over time on time. And you don’t necessarily need a lot of credit. I think there’s a misconception out there that people just go out there and go crazy getting credit cards and cars and all that kind of deal, right? You really only need two or three credit cards. And honestly, the lower you can keep your debt, the better. I would say that don’t pay things off. Completely. If you’re trying to build credit. I know that sounds like counterintuitive, but you want to keep a very small balance on your credit cards, you want to keep a small balance on everything, avoid the large ticket items like cars, like installment loans, like cars and furniture and things like that, and stick with the revolving credit, keep it super low. And anybody can raise their credit. I would definitely attack judgments or any kind of public record type of debt that you have. Yeah, I would get take care of those, I wouldn’t necessarily start paying off collections to talk to someone like me. Right? Because when you start paying off collections that actually activates and brings them active again, and sometimes it hurts your credit. So I would definitely talk to someone that knows what they’re doing. They’re looking at your credit. Yeah, on that
Yoni Schmidt 17:44
with collections, too. I know that you definitely want to negotiate with them to make sure that you’re paying it off to delete it, not necessarily just wipe out the balance.
Alfredo Madrid 17:54
That’s a that’s a great point. If they’re willing to delete it off your credit. That’s the holy grail of paying a collection off now. I will say this, it’s easier said than done. Yeah, a lot of them just won’t do that part of it. If you tell them specifically, like I know. I have a friend actually who’s part of total Adjustment Bureau. And he tells me a few we will tell them that it’s for a mortgage to buy a home, they actually do work on deleting it for you. Yeah. So if you let them know that it’s for a home, a lot of times you get a little more lenient on that. But deletion is the number one. Number two, like Yoni was saying, if you can negotiate it down, you owe $5,000. You can say, Hey, I got 3000. Yeah, you know if it’ll take 3000 Right now paid all right now. But again, on those collections, I would totally wait till you talk to somebody that knows what they’re looking at a credit, we have tools and calculators and all kinds of stuff that let us know how, how to improve your credit tool.
Yoni Schmidt 18:49
And when you say keep that debt low, right? You’re talking about your utilization ratio of how much you’re utilizing, from your credit, what’s the like, most ideal percentage ratio that you would see, you know,
Alfredo Madrid 19:01
people used to always talk about 30%. But it’s the lower the better. You know, if you can get it every I would say there’s a threshold every 5%. So if you can get it, your utilization under 5%. That’s the best, right? So for simple math, if you have a credit card with $1,000 limit, you want to keep it under 50 bucks, right? Right. When I play around with that calculator, sometimes I drop it down to 10 bucks on a $5,000 debt and it kicks it up. So those algorithms for the credit bureaus are kind of funky. And so you never know exactly where the thresholds are. But it could be that it wants these two credit cards low and this one is zero. I will say a lot of people are under the assumption that we’re just paying everything off as the best case. And what’s weird is when I run those those simulators, and I pay everything off the credit will drop sometimes. Yeah. Interesting. Yep. Authorized User Accounts are also a great way to build your credit. They’re also a great way for your credit be to be dragged down because the card you’re on is is not healthy. didn’t get paid on time or the balance is super high. So I definitely look into that if you don’t have a ton of credit to find a family member or somebody that’s willing to add you an authorized user account. Yep. But again, these are things that it’s important. You don’t wait till you’re like, Oh, hey, I think we want to buy a house this month. I think, like I said, everybody should have a game plan that they’re working on to increase their buying power as much as possible, because you should and could want to buy a house. But there’s also a lot of other great things you can you can do with credit, overall, things are gonna cost you less if you have good credit, right? Cool. Income will usually take two years work history, and we take the two year averages of your overtime bonuses, anything that’s not your regular pay. I would say right now in the marketplace, there is a big emphasis on your average hours that you’re working. So many people think they’re full time but in the underwriters eyes right now, if you’re not averaging full time, you’re not full time your variable income. Interesting. So if you’re preparing yourself to buy a home in the near future, six months, two months, two years, just be aware of that how many hours you’re working a week matters. Now, this doesn’t count PTO, and vacation hours? I mean, if you’re getting paid for this good. So how many hours are you getting paid per week on average? matters right now a lot. It didn’t matter as much before we could get explanations as to why they were low. But right now that we’re there really underwriters are really scrutinizing when somebody is not averaging the hours, they say they work. Yeah.
Yoni Schmidt 21:34
So what could someone do if they’re not averaging? You know, that, that full time and the underwriters view? Well,
Alfredo Madrid 21:44
the like, say, looking at it statically. Like right now, there’s when you say, what can they do? Do you mean like, what can they do moving forward so that they’re not in that position in the future? Or what can they do right now?
Yoni Schmidt 21:54
Yeah, what can they do right now? Pick up something on like the gig economy, right, where they’re Googling and, you know, door dashing or something like that. And the underwriters would view that, as, you know, additional hours of work where they’re, you know, benefiting from some income, or would that not necessarily be something that they? Unfortunately,
Alfredo Madrid 22:13
that’s a good question, because a lot of people we get that question in applications all the time, you know, more and more and more people are or have side gigs. Yeah, you know, whether it’s a little Uber right here, or Amazon or something like that. Any income where you’re being paid, contracted, 1099, anything like that, you would need to have it two years. And if it’s your second job, you have to have it at the same time as your job simultaneously for two years. In other words, you got to prove that you can hold these two jobs for two years. So that wouldn’t really help. What could help in the Now Is us finding a good reason why your year to date is low. Like say, for example, you had a baby, right? And you and you were out for on maternity for a month and a half, and we get to deduct that from your year to date and be able to use a new average. Yeah, that could do it. Like if we find a good reason. But
Yoni Schmidt 23:06
that’s interesting. So life events come into consideration when the underwriters are looking at that, sure, even if you’re sick, and you had some medical bills or stuff like that, or it’s possible, right?
Alfredo Madrid 23:16
Like, you can’t just be like, you know, I, I decided to travel for a month and a half, right, you know, having a baby is a significant event that you really can’t do much about. So that would probably be one that that we could, they’d want, you know, we can’t get too deep on what proof I can get on it. But I can get the verification of employment from the employer saying out on maternity leave, you know, that doesn’t violate, you know, privacy, or HIPAA or whatever might violate there. So yeah, definitely, if the employer is willing to vouch for you, that you are out for legitimate reason, then you can use that. Yeah. And as far as income self employed, we get a ton of stuff that right now, unfortunately, we’re self employed, it’s like two years tax returns, right? We have to have average of two years income. So be careful on your only goal of doing your taxes to be to not pay taxes. Yeah, we get that a ton. You know, they, we get taxes in and they wrote off way more than they should have or could have or whatever it is, you know, their tax preparer wants to look like a rockstar by not having to pay any taxes. And they come in here and their buying power is completely gone. So I’d say Be real careful about that. I always hate to see it when somebody owns a business that they started their own business or own their own business and I really think they’re shooting themselves in the foot when they when they do it to that level because now they’ve not only lost their buying power with buying personal things, but how’s their business going to go out and take out a business loan warehouse they want to buy equipment they need any material they need and so I think it’s important to not have be so single track that hey, I just don’t want to pay taxes. Yeah. Besides that on income if you have any questions obviously, let us know. have assets. We want the money in your account for at least 60 days, but you can get a gift from a family member. Again, all these all these, we’re talking about this just so that you can start preparing. I mean, this is for all those people out there renting. There’s a lot of great programs right now for first time homebuyers. There’s downpayment assistance. There’s incentives if you’re a first time homebuyer and make under a certain amount, there’s incentives if you’re buying in certain areas in your first time homebuyer, and there’s all kinds of stuff.
Yoni Schmidt 25:27
Yeah, and, you know, two things that I can think of right off the top of my head is finding a property management company that will report your rent payments as huge credit bureaus. So that’s huge. You can actually increase your credit, and then also finding a rockstar real estate agent that can help you negotiate. Sure
Alfredo Madrid 25:44
I know a good one, the best terms the best place. I know a good one. What advice would you have for renters right now from your side of? Yeah, well,
Yoni Schmidt 25:54
you know, I think from my side of the ball, I’d say that, you know, closing costs is something that we’re seeing coming back right now, right, a lot of buyers are asking for closing costs, especially those first time homebuyers on certain loan products like FHA, VA, taking some of that closing costs and buying down the rate is probably something that would benefit any buyer. first time homebuyer, especially if they’re, you know, looking to hold on to this asset for a long term. I think buying down the interest rate, you know, of course, long as you’re willing to stay there for at least the breakeven period. And it’s a smart thing to do, you’d be saving 1000s, if not 10s of 1000s of dollars, on your interest payments. And, you know, I know lenders like you probably don’t love that, but buying down the rate buying down the rate, or the investors at least that are that are issuing the notes. I would imagine that they prefer you don’t
Alfredo Madrid 26:54
it’s actually it’s actually probably the opposite right now, just because the reason is, is that it’s a very high likelihood that the higher the rate is, the more likely they are to refinance in the future. That’s a good point. Yeah. So so if anything lenders are kind of promoting right now in the pricing is set up this way that you would want to buy some points. So that so that you have a lower interest rate, but then also there’s less likely because if you know if you right now you close on an eight and a half percent interest rate because you didn’t buy any points, or eight or whatever it is. As soon as rates go down to seven, you’re refinancing. But if you bought it down to 7.3, and they go down to seven, right, you’re probably not refinancing, right? So I think right now, everything’s geared towards paying some points. It’s crazy. There was a time not even that long ago that there’s no way people would pay points or like I’m not paying points. Right. Right. And now, I haven’t seen a deal in a long time where people didn’t pay for points, so that the market is just compressing so much that that, that that’s what’s available. That’s the best available right now.
Yoni Schmidt 27:56
Yeah, and I think it’s a smart move, especially because it can make your monthly payment a little more affordable. Yep. Right. Another another piece of advice is, I guess, a product that you were mentioning to me maybe about a year or two ago, which is you could probably explain a little bit better than me, but it’s the one to bite out.
Alfredo Madrid 28:18
Yeah, so we have a three to one buy down a two one buy down and a one oh buy down. That’s a great product because what you’re doing is you’re negotiating that the seller basically pay a portion of your payment for the next three two or one years. Yeah, right. And what’s nice and then after those three years it goes back up to whatever the original rate was right but on that three to one I mean that one’s really cool it goes down three percentage points essentially the first year yeah and a lot of sellers right now are motivated to do that because the markets not moving as much right so I mean that’s another thing I want to urge people out there tenants whoever’s in the market I keep hearing this like well Alfredo rates your rates are high right now I want to wait right and man right now is when the market is the softest as far as you’re going and getting the best rate you can as you only tell me this rates dropped to five 5% in March like everybody’s crossing their fingers what happens to the market
Yoni Schmidt 29:19
Wow. I mean, it’ll really stimulate the economy in a way that you know may not necessarily be the greatest because we already know that asset prices are a little bit inflated what’s
Alfredo Madrid 29:32
gonna happen to the prices of real estate though? Oh shoot up it’s gonna be nuts. Yeah, it’s dude I’m telling you like it’s gonna be multiple offers over ask price over appraised that like there for a little bit. We didn’t see it here in Oklahoma. But you know, I do some lending in Texas and other states. Like people were paying significantly above appraised value, not just over list price houses were appraising. 30 40,000 hours low and the sellers like take it or leave it and people We’re paying it. Yeah, gladly. They, as a matter of fact, their sellers in markets, and it started to be that here, they would not accept an offer. Unless you waive the appraisal contingency.
Yoni Schmidt 30:12
I saw that during I mean, 2021 2022. Two very bizarre years in real estate. That’s nuts. Seven, eight years that I’ve been doing it here in Oklahoma. Yeah, it is. It was, it was quite interesting. You know, but we are seeing some of those investors and homebuyers bought in 2021, already turning around and trying to sell their assets. You know, and they probably can’t make what they need to write to cover, you know, to cover whatever it is that, you know, they put into it. Sure.
Alfredo Madrid 30:46
Yeah. Well, I mean, it’s kind of like, when’s the last time you saw a, I mean, it’s getting tougher in this market, because when’s the last time you saw somebody post, their Robin Hood screenshot of how much money they’re making. I haven’t seen this in a while. 2021 everybody was doing it. And that’s the same thing with real estate, everybody was pretty self proclaimed expert in real estate, because, honestly, you couldn’t throw a rock and hit it and hit a house that wasn’t gonna make you some money because everything was appreciating, right? So everybody just all of a sudden thought they were these experts, because literally anything you bought, and even put some money into it. It was gonna be worth that much more and two months, three months, four months, five months. Yeah. Right. Well, that’s not happening right now.
Yoni Schmidt 31:27
No, it isn’t. I mean, then again, a lot of people are unloading properties. Right now you’re seeing Yeah, I mean, we’re seeing we’re seeing selling, not a lot. I mean, the inventory levels are pretty stable. I would say there’s probably two and a half months worth of inventory. I mean, would you agree? Yeah, yeah. But we are seeing some of those buyers who were in the market in 2021 2022, you know, last year, 12 months ago, trying to sell their assets for prices that they’re not going to get? Right. Right. And so now it’s a question of, you know, how can they incentivize buyers? Right, some some, I saw one seller in Wichita, for example, offer a 3.25, assumable. Loan. And, you know, I was I was very surprised that this house that was on the market for a very long time just wasn’t moving. And the reason probably is because it’s at such a high price, that it’s not worth it even at a 3.25 assumable loan. Well,
Alfredo Madrid 32:28
that’s what I tell a lot of the people that I’m talking about, right? I’m like, would you rather buy a house? And this isn’t a question that’s like one of those obvious ones like, Well, duh. But it’s a question to ask, would you rather buy a house with a high rate or a high price? Right? And what to me, just to kind of jump to the to the punchline here is like, a high rate I can work with, once you pay the high price that money’s gone. Right, right. So if you buy a house right now, we’re rates a little higher, but prices are softer, your you can fix that later down the road by accelerating your payment by refinancing by all kinds of stuff. Right? But at a high price, right? And like, shall we these rates come down to that five that I talked to you about? Let’s just say they do and I you know, I hope hope to god they do. But if they do, I mean, it’s it’s going to be a madhouse, alright, agree. Right. And I think it’s going to be really tough to buy and you’re going to be that same 250 house that you’re looking to buy right now is going to be 282 90.
Yoni Schmidt 33:27
Easily. Yeah. What would you say to someone though, that, you know, when you ask them, What would you rather buy at a high rate or at a high at a high rate high price? When they say in response? Well, at a lower rate, I could afford more house.
Alfredo Madrid 33:46
We don’t have lower rates. You know what I’m saying? Like we like he can afford more. So in that same example, is if he says, well, Alfredo, if rates come down, I can afford more house. But the thing is, is like I could show him the payments on it. And let’s say it is that 250 house right now at rates today, for 30,000 more dollars, even with that lower rate, his payments still going to be higher. That’s what I would probably show him. Yeah. Right. I think people are still too. They have some like regret that maybe they didn’t buy in that 4% market or 3%. Market. And so they think that’s going to come back. It’s just I don’t believe it will. I can’t guarantee that but I just don’t believe 4% rates are coming back.
Yoni Schmidt 34:28
I mean, it’s gonna be a while for sure.
Alfredo Madrid 34:30
I don’t I don’t. It’d be tough. Yeah, right. And not Well, I’m in the business, I would think but you never know. I just don’t see him coming down that far. But they could Yeah, but I would, I would probably sit down with them and compare what we think that payment would be if it’s $30,000 More but then I could go over by downs. I can go right by downs. I can go all kinds of stuff with them.
Yoni Schmidt 34:50
Yeah. And so who are you seeing right now in the market buying houses and who is the market position for best to go after You know,
Alfredo Madrid 35:01
and that’s a really, really good question. It is first time homebuyers first time. Yeah, the reason it’s first time homebuyers is because put yourself in the shoes of a homeowner right now. I think I saw something earlier today that over 50% of current homeowners have a rate at like 4% or under. Right. So imagine you have a 3.5 or 3.2% rate, which I think you do 3.1. Yeah, absolutely. You have a 3.1% interest rate. So now, you’re, you’re going into the market, you have to sell your home at 3.1. And then go get a rate right now seven and a half. So you you might have to downsize to keep the same payment. Right, right. So nobody wants to sell right now. And so anybody that has a that’s not a first time homebuyer, staying where they’re at. So we’re seeing a ton of first time homebuyers, and we’re seeing incentives for first time homebuyers. I’m seeing a lot of interest in the new construction thing, because that’s where the inventory is right now. Yeah. So that’s what we’re seeing the most of right now. First time homebuyers. Yeah. Which which is tenants. Right, which is people renting right now, most most tenants are probably haven’t bought a home before. Right. So I think that it’s a great market for them right now.
Yoni Schmidt 36:12
Yeah. So you mentioned builders, right. You work with builders? I’m guessing? I do. You know, builders, they have a lot of inventory. They are I don’t know if a lot of inventory, but some of them have some inventory that they’re kind of left with from you know, I guess 2022, right. Yep. And it’s been a little bit tougher to move that inventory, because of the higher interest rates? Are our builders offering anything for first time homebuyers or any buyers in general, in terms of, you know, better terms better, better closing costs, better interest rates? What are the builders that you’re working with right now,
Alfredo Madrid 36:50
man, it’s, it’s all over the board. I’m seeing incentives up to $40,000 to buy homes from a builder. So they’ll they’ll use $40,000, you can use it as a price reduction, you can use it to buy closing costs, you can use it to buy points. So now we are able to buy people’s points down to 5.99, or whatever that might be. So I think that’s a great market to do that in. You typically don’t find that in the US market, because the homes want to praise. But they know what their homes are appraised for they know what they’ll sell for. Right. And of course, there’s even though there’s a lot of demand for new construction, because use can use inventories down, they still feel the pressure of needing to get that inventory off their books. Right. So they’re motivated to get those houses off, and they’re going to give give you every reason possible to do it. So yeah, we’re, we’re an approved lender with a couple builders in town, and they’re definitely given 30 $40,000 in incentives. Right now. Yeah, it’s pretty neat.
Yoni Schmidt 37:50
And are those incentives only for first time homebuyers? Or is it just for anyone who would walk off the street could also buy it? Yep.
Alfredo Madrid 37:57
I mean, anybody that qualifies for their loans, or has the money to buy them? And they they can do? Yeah, that’s right. It’s not just for first time homebuyers.
Yoni Schmidt 38:03
So you’re saying anyone who’s renter who, you know, is looking to buy something, anyone who’s, you know, buying their second house, maybe, and they want to turn one into an investment property? You know, an investor even could walk in off the street. And as long as they qualify, they’d get up to $40,000. That’s right,
Alfredo Madrid 38:23
depending on the price. Right. Yeah, I think, you know, I’ve seen obviously, the higher the price, the more the incentive, but you know, I think the 400,000 might be the threshold. Yeah. And the buying a brand new house, brand new house. And what’s nice about brand new houses, new construction that I really love for, especially for first time homebuyers, but for everyone is, number one, your utilities are going to be super low. Okay, utilities are going to be down because your house is insulated. Well, you’re not having to use a lot of gas or a lot of electricity to keep your house warm and cool, new efficient system. Oh, yeah, totally. You’re gonna have a warranty, something goes wrong. You know, obviously, when you go from being a tenant, to owning your home, you don’t get to call somebody and say my water heater is broken. That’s on you. Right, right. And so new construction for the first year, you do get to call somebody and say, hey, the water heater broke. Right. And so that’s a huge plus insurance is less costly. Homeowners Insurance is less costly on new construction. Oh, yeah. So that’s a big deal as well, too. Yeah. There’s several reasons you actually end up qualifying for more house when you’re buying new construction and when you’re buying us because of the insurance piece, right? Mainly, but also budget wise, I’d go through budgets with clients all the time, budget wise, you’re able to qualify for more because now qualify afford more, because your utilities are going to be lower.
Yoni Schmidt 39:43
Right. And so we’re talking a little bit about budget, right? One of the things I guess that is important for anyone who’s a first time homebuyer is to have a budget in the first place. Right understand how much money you were bringing in every month, how much money it’s going to cost you to own that home to maintain that home for your utilities for, you know, escrowing for your insurance in your property taxes, right. And we know, property taxes and insurance could be moving targets, right, especially if you’re buying a new build, right the first year, it may have been that that land was developed and the taxes were very low. And then once you’re coming into that second year, right, you don’t want to be surprised by that tax bill that’s just going to show up. And it’s, it’s going to be substantially more, right.
Alfredo Madrid 40:30
Yeah, it’s funny when I when I have clients and always kind of know, which is the budgeters. And which ones aren’t? Because I’ll ask, you know, is there a price or payment you’re looking to be at in the budget, or always go to payment, right? Like, I have to be at this payment. And that’s a smart thing to do. Because, you know, at the end of the day, that’s what you have to live with for that long. I mean, we get enamored with a certain house in that price. And so you want to make it happen at all costs. But until you sit down and do a budget and understand if you can afford it or not, you don’t really know what you’re getting into. Yeah, right. And you may not own that home for very long, right, if you don’t understand how that payment fits into your budget. So that’s one of the first things I like to do with clients anyways is just go go over their budget and go as far as to do a budget with them. Right, but, but definitely make sure they understand where their budget is. Because that’s that’s the most important piece of it. Yeah.
Yoni Schmidt 41:18
And owning owning it for long, which, you know, is my favorite part, I would say long term real estate invest holdings, buy and hold, right? What What would you say? That is kind of like the most important thing for homebuyers who are looking to not just like buy their first home, or, or invest in a piece of property, but also build themselves a little portfolio of real estate, you know, investments.
Alfredo Madrid 41:50
It’s, I think it’s always a function of like, where you’re at, in your in your story, meaning like if, if you’re a young family, or young person unmarried, no kids right now, I mean, I would be doing the buying my primary, putting minimum down, living in it for six to 12 months, renting it buying my next one, as long as I can get away with it, if I could, you know, that’s the same advice I’m going to give my own son. And that’s the advice I would give my 20 year old self is do that. You know, I didn’t do it that way, because I just I didn’t know. Right. But that’s what I would probably do as much as often as I could do it. Because I do think, again, not every city and not every market, not every is is going to work this way. You know, there are markets where the house prices are just too high. And your return on your I mean, it’s just not high enough. You can’t you can’t get enough for it to cash you have to be able to cash flow. But you can cash flow here. If if you get to certain loan devalues in Europe, and you can get your payment down. Right, you know that better than anybody?
Yoni Schmidt 42:55
Yeah, I mean, I think those other markets that you’re mentioning, right, the tax bill at the end of the year and the insurance costs just it’s too much, it’s too much and your your your expenses just don’t kind of or your income from your home from the investment doesn’t keep up with the tax bill and the insurance bill at the end of the year, we’ll
Alfredo Madrid 43:12
forget even the investment piece of it. Like there’s market like, you know, I’m a licensed California and I’ve done a loan up there for somebody in San Francisco, right. And the house prices are so high there that from a building wealth standpoint, you’re better off renting and just saving your money or icing it here. It’s right Yeah, but I’m just saying like you’re actually better off like buying a home, there’s more like a luxury item than it is any kind of like trying to convince anybody that this is a wealth building, I truly believe to sit now. It’s not it’s not like the super aggressive with buying your own home. I mean, like a person who is like this is super aggressive wealth building, but it is a wealth building tool here in Oklahoma. Because of the prices of the homes. Yeah. And the affordability. And so for,
Yoni Schmidt 43:58
you know, renters who are looking to buy their first home for example. Yeah, right. We talking about holding the property long term? Yes. Right. They have they’re kind of like their two buckets of like, their needs and their wants. Right. And people a lot of the time they they focus on the wants, right? I want to have a fifth bedroom or fourth bedroom or, you know, a playroom, or a pool or a sauna or whatever it is that you’re looking to have in your property. Right? Yeah. How do you how do you help buyers reconcile, you know, the needs and the wants and, you know, buy their first property because it’s such an emotional process for people who are going through it for the very first time.
Alfredo Madrid 44:43
It’s very rare that a person’s first homes or dream home, and they have if they the faster they understand that the better that that’s a means to an end. It’s a stepping stone to get to their dream home, the easier it is for them to process this season. Right meaning like when you buy this home, you’re gonna put money down, you’re going to live in it, you’re going to build equity, that equity is going to help you graduate to the next one into the next one into the next one to get to that perfect house that you’re gonna have, if you can understand that, at first, that helps you out so much. Because you’re right, people are either going to have such high expectations that are going to be young, beyond their affordability, that they’re never going to be able to make that first move that first step, right. Or they’re gonna get themselves into a situation they shouldn’t be in. Right. So you have to understand that first house more than likely is not
Yoni Schmidt 45:30
the home, right? So sacrifices in the present will yield you know, greater outcomes in the future. Well, you’re already sacrificing
Alfredo Madrid 45:38
you’re renting, right? You are it’s just a little less of a sacrifice and then Lula’s until one day you go, alright, this is it. I’m sitting on my front porch, drinking my coffee, looking at the sunset. Alright, this is the one. And
Yoni Schmidt 45:49
sometimes you just have to start off renting, right? I mean, you have to start off with something that you can afford. And you know, I was a renter in college, I was a renter, you know, for a little bit, I guess. Not really after college. But thankfully, I had some family that let me stay with them. But you know, you have to make those sacrifices and maybe be a renter for a little bit, save up your money. And, you know,
Alfredo Madrid 46:14
absolutely, you’re into it, you have to rent but don’t assume, don’t make assumptions about what if you can or can’t buy without advice, professional advice, don’t make assumptions about that. I mean, you know, to tell some success stories kind of here to the end. I mean, I’ve had plenty of people that call me to go over how they’re going to get to that 20% down and how they’re going to get their credit way up. And, and I look at their situation and get ready to give them advice. And I look at him and I say what if I told you you could go by this weekend? Yeah. Right. And they’re like, What are you talking about? How happy to do that to make? You know, it’s it’s funny, it makes them very, some people even get nervous, right? Because it’s like, what, what happened here? I was not expecting that. So. But yeah, I mean, it makes them ecstatic. Like, they can go out there and look, and and so I think that it’s you have to be you definitely have to run you definitely have to make sacrifices. But in order to know where you’re going, you have to know where you’re at. Right? If you called me and asked me on the phone for directions for Dallas, you know, my first question would be what? Where are you? Yeah, where are you and I’ll tell you how to get there. And so that’s that’s the that’s the big thing with printers right now. That’s the last thing I believe is the biggest advice is like you, you have to take stock, you have to find out exactly where you’re at right now. So that you can look ahead and go, Okay, I’m gonna rent for another year, another two years, which is going to put me in the position to make take that next step. So that eventually I get to the place where I want to be, yeah,
Yoni Schmidt 47:44
but call the experts. That’s right. And I’m gonna get right here so that he can help you with your credit with you know, your your plan for saving your budget, your pathway to homeownership. And
Alfredo Madrid 47:55
then that’s when I get to get you over to Yoni, which is the fun part, which is the going and looking at the house. I mean, that’s what people love to do is go and imagine themselves in their, in their families in these houses. And that’s why that’s why they cry at closing tables. And that’s why, you know, this job is so satisfying is because there is this really neat end of the rainbow that we get to, you know, go on a journey with with these clients. Definitely,
Yoni Schmidt 48:16
I think, you know, that we’re in an industry of putting roofs over people’s heads. It’s, it’s a pretty important one. It is any
Alfredo Madrid 48:24
last pieces of advice for tenants or homebuyers out there or in general, you know, just
Yoni Schmidt 48:31
look for the resources. Don’t just, you know, sit, sit around, try to research everything yourself. If you have questions, there are resources out there people that you can ask questions and people who have gone through this time and time again, and they’re there to help. So awesome. Give us a call. All right. Well, I
Alfredo Madrid 48:49
appreciate you, Yoni. Yeah, I
Yoni Schmidt 48:50
enjoyed it so much. Appreciate it.
Outro 48:56
Thanks for listening to The Same Day Podcast. Tune in to a new show each week, and be sure to subscribe to get future episodes