Maggie:
[1:47] I’m Maggie.

Taylor:
[1:48] I’m Taylor.

Jewels:
[1:54] I’m Jewels and we have a very special guest with us today.

Loren:
[1:57] Loren, who’s back.

Taylor:
[1:57] Loren’s back.

Becca:
[1:59] She’s back.

Taylor:
[2:01] We actually never let her leave. She has been chained to the couch for a week now.

Loren:
[2:06] Only Vaginance matters. That’s, that’s what you have conditioned in me.

Maggie:
[2:10] Now that’s the new T shirt.

Becca:
[2:11] Yeah. I want that sticker. Only Vaginance matters.

Taylor:
[2:12] Thank you for coming and being on our podcast twice.

Loren:
[2:14] Absolutely. I loved it. Any time. I’m just going to come and ask questions because I’m so stupid when it comes to finance. So let’s do it.

Taylor:
[2:16] You should. Yeah. Just come hang out with us.

Jewels:
[2:29] That’s not true. You’re so normal, you’re so normal when it comes to finance.

Loren:
[2:29] I’m so normal.

Jewels:
[2:36] I know you wanted to talk about the tax benefits last time.

Loren:
[2:37] Definitely tax benefits. And also, oh, one of the things we did was we waived escrow by maybe like, escrow confounded me for the longest time. Like what it was, what it meant.

Jewels:

[2:51] What part of your escrow, like are you having to withhold your own property taxes?

Loren:
[2:51] Yeah, we pay no, we pay all taxes in a lump sum instead of doing it over time. And that was something my parents were encouraging us to do. Um, but I, that was, for a long time did not make any sense to me.

Jewels:
[3:07] Yeah. I’m really curious why your parents are a big fan of that.

Loren:
[3:15] I think it’s just because they don’t like, well because then if they come back and they tell you how much the taxes are, you can fight it, you know, rather than pay it in installments. I think that was kind of what they described it to me.

Jewels:
[3:27] You fight it anyways. Fight it anyways, it’s not, it’s not bad at all to. So the property tax escrow thing is in my monthly mortgage payment every month. They, the bank that holds my mortgage automatically pulls out 1/12 of what we think my property taxes are for this year. So if I have $6,000 property taxes every month, they pull 500 and they just save that in an escrow account until the end of the year when I get my property tax bill and then they pay it out of that. But you don’t know your property taxes until the end of the year when you get that bill.So you’re kind of setting the escrow amounts as a guess and sometimes your property taxes come in below that and you actually get a refund from your escrow, that’s what happened to me this year, especially after fighting it because you can fight it and keep it down.

Taylor:
[4:17] Which is what happened to me.

Jewels:
[4:22] So you keep your estimate a little high. And then you kind of get like basically a tax refund out of your escrow account. So what it sounds like you’re doing is you’re actually, you’re just paying your mortgage right now and at the end of the year when you get that tax bill you need to have enough money in your account to cover the full tax bill. So it’s putting a lot more of the burden and planning on you.

Loren:
[4:45] Right. It’s just a different way of doing it and yeah, we definitely have to be more proactive in terms of savings, but I don’t mind doing that.

Jewels:
[4:53] Yeah. That’s very good. I as somebody who has got myself in trouble with taxes by having the account with the tax money sitting there and then had to rob Peter to pay Paul. And that was very convenient. I could not do that to my escrow account. So the escrow works very well.

Taylor:
[5:14] Yeah. So when you had messaged the other day about what was it, like taxes? I had no idea what you were talking about. I was like, I’ll check. And I was like, what the fuck is she talking about?

Loren:
[5:27] Well, that’s a great question I have because we bought this year. So technically next year we’ll be taking into the account that we purchased a home and putting that into our taxes. So what kind of benefits do you get from buying a home on your personal tax return is a big thing that I have no idea about.

Jewels:
[5:43] Totally. So before we get into the specific tax benefits of buying a home I just want to break down the difference between deductions and credits because I think that’s super confusing in the US system. So basically when you are calculating your taxes you take your adjusted gross income, which is like the income the government actually considers taxable and that might be lowered by things like contributing to traditional retirement accounts. So just for example your actual salary might be $100,000. But if you contributed $10,000 to your traditional retirement account your actual taxable income comes down to 90,000. That’s like adjusted gross income. So then deductions come off of that income before they apply the tax bracket. So if you get a $5,000 deduction for something that’s going to bring it from 90 down to 85,000. So your actual income that gets taxed is after the deductions come off a tax credit. On the other hand is money that comes off your actual tax bill. So after you’ve calculated your taxes like let’s say your tax bill was $6,000 at the end of the year after it’s been calculated and you had a $1,000 tax credit then you would actually only owe $5,000. So deductions come off of your income and credits actually come off of your tax bill.

Loren:
[7:12] So deductions are kind of putting you in a place, a lower starting point to make your tax, to make your overall taxes less.

Jewels:
[7:12] Correct because our tax system here in this country is progressive. So the more income you make, you might be taxed at a higher percentage of that income. So it might lower your tax bracket, so that’s where the deductions come into play. Okay, so now that we know the difference between those, um definitely the biggest benefit that most people are familiar with is your ability to deduct mortgage interest. So every month when you’re paying your mortgage, you’re also paying interest against that loan. This is where that interest rate on your mortgage comes into play. So at the end of the year, you get to add up the total amount of interest you paid this year and you get to deduct that off of your income before you figure out your taxes.

Taylor:
[8:00] That does sound vaguely familiar now. I feel like TurboTax asked me that and they took, they definitely did okay. It’s all coming back to me now in waves now that you’re mentioning it. It definitely calculated how much I had paid in interest and then deducted that from my income for sure.

Loren:
[8:16] So I’m going to make prediction or I think based on math, which has been a long time. Is it better for you when you first buy a house because your interest is higher that you’ll have more deductions when you’re just purchased the home than like 15 years from now.

Jewels:
[8:33] Correct because the total annual interest you’re paying goes down over the life of the loan because you’re paying it on the remaining balance.

Becca:
[8:40] Are the tax benefits the same if you live in the house versus if you don’t live in the house?

Jewels:
[8:46] Yeah, they are, they are a little different. Um and I think a lot of this came out actually in the new tax bill. That was, I think it was a 2017 tax code update. And that actually put limits on the amount of mortgage interest you can deduct. So for your primary residence you can deduct interest on a mortgage up to 750,000. So if you buy a $1 million dollar house, you can deduct the interest on three quarters of it, but you cannot deduct the full 100% interest you paid that year because you don’t get to deduct the interest from 750 to a million. But as long as your house, your mortgage is less than 750 you can deduct all of your interests. I believe for investment properties there’s no limit.

Becca:
[9:33] Weird. Why would that be true?

Jewels:
[9:35] But I believe the reason they put the limit on primary residences is because people in really, really high property value in high tax states like California were getting a massive benefit that the rest of the country wasn’t and that was being subsidized against the federal income taxes. So someone in California was getting to write off all the interest on their $3 million house. And so someone in Kansas is having to pay more of their taxes than someone in a high cost state and that’s a primary residence issue because they’re choosing to live there as opposed to investments. You don’t typically want to invest in something that’s like an outsized burden in that way. But primary residences are different. So I believe that’s the reason they put that in. It was to put the like it was more of like a national cap. Like everyone in any state can write off up to 750,000, which is a pretty generous amount. I mean obviously we’re seeing houses here go way over that now, but we’ve hit a point where we’re a high cost of living city.

Taylor:
[10:37] Okay so I pulled up my US bank ap and I’m looking at my monthly payments. So for my mortgage payment it’s $2,142 every month. And then the principle is 570 to 89. Obviously these numbers like adjust a little bit per month but this is like about the same every month. The interest is 945.29. And the escrow is 623.95. So can, I know we have talked about escrow a million times and you literally just mentioned it can you? I still don’t totally understand why it’s charging me escrow every month and interest. Like how are they? Sorry I know you literally just explained this and my brain is like not absorbing it at all.

Jewels:
[11:25] It’s because escrow is a ridiculous word that means nothing.

Loren:
[11:29] And also doesn’t it mean? I’ve heard people say that they’re in escrow. What does that mean?

Jewels:
[11:32] So you will have funds in escrow. So escrow is a third party holding account. So for example, your earnest money, yes, you send that to the title company and they put that in an escrow account that nobody gets to touch until either you close on the house and that gets wrapped into your closing costs or you back out and that earnest money gets transferred to the owners of the house that you backed out on. So it’s in escrow. But you’re not in escrow.

Loren:
[12:02] This is like, this is like when I was a kid and people would say someone was in a coma and I thought they were in a place called Acoma. And then for years I didn’t realize it was a coma.

Jewels:
[12:15] It is a strange turn of phrase anyways. In a coma.

Taylor:
[12:19] He’s in a coma. It’s a lovely place. It’s great. People take care of you. You don’t pay for anything.

Loren:
[12:23] And she just went to Acoma.

Maggie:
[12:26] That place sounds like it sucks.

Jewels:
[12:33] Okay, Taylor, so the money that is being escorted from your monthly mortgage payment is being held for your property tax bill at the end of the year.

Taylor:
[12:41] Oh, yeah. Okay. Yeah.

Jewels:
[12:43] So you have the principle that’s going to pay off the actual amount of money you quote unquote paid for the house, you have the interest which is going to the bank that wrote you the loan to pay them for the privilege of getting to spread that payment out over 15 or 30 years and then you have your escrow account which is being withheld for property taxes.

Maggie:
[13:05] Escrow can also be used for paying your insurance as well.

Jewels:
[13:09] Oh yes. Actually it probably is in that too because a lot of us wrap our house insurance into our mortgage payment.

Taylor:
[13:17] So if we over-pay the remainder, I don’t understand.

Jewels:
[13:20] So your your home insurance tends to be like most insurance policies, it’s a fixed amount, you know what it is for the year. And so they just add that in and then they take the estimated property taxes and the escrow that so both of those might be in there, as Maggie said.

Loren:
[13:34] Now this is a perfect opportunity to ask the benefits of doing an all cash offer versus getting a home loan because obviously paying interest sucks, but is it is it really better to do all cash if you have the money?

Jewels:
[13:46] Mortgage math, mortgage math.

Maggie:
[13:52] Yeah, well there are benefits to it, but also there are probably better ways you could be spending that money.

Jewels:
[13:59] Yes. Yeah. So many things on this, right. And there’s a lot that goes into buying a house and whether or not you want to do it in cash and whether that’s even possible. So oftentimes it’s not even possible for people.

Taylor:
[14:11] Oh, shit, Becca just put an offer for a house. It’s very exciting.

Becca:
[14:13] I’ve gotta, I have to sign these documents. I hate this. I’m not sure why I thought it was a good idea.

Maggie:
[14:18] Freaking out.

Taylor:
[14:24] Becca is having a panic attack. All she’s been talking about is buying a house and she was super depressed about it last week and now she’s about to buy a house and she’s freaking out. And it’s beautiful. It’s a beautiful circle of life.

Maggie:
[14:25] Becca, literally last week we talked about this. I said buying a house is not a good time.

Jewels:
[14:41] But owning a house can be better eventually.

Becca:
[14:44] I don’t want it anyway, I hate it.

Taylor:
[14:44] Can I take a picture of you?

Becca:
[14:45] Are we sure this is a good idea and this is not the worst idea that anyone’s ever had.

Jewels:
[15:05] If it was the worst idea, there’s no way Zach would prep those documents.

Taylor:
[15:14] Zach would not let you.

Maggie:
[15:14] Zach would not let you do it if it was a bad idea.

Loren:
[15:14] I wanted to buy this one house, and Zach told me over and over not to do it.

Jewels:
[15:21] 10 different ways to say no.

Loren:
[15:22] We went and saw it and he was like, don’t do it.

Taylor:
[15:26] It’s very exciting.

Becca:
[15:27] No it’s not, I hate this.

Loren:
[15:31] Well, you’re feeling all the emotions we did. So that feels normal, at least.

Maggie:
[15:32] If you need anyone to hold your hand or make you a drink.

Jewels:
[15:35] Massage your shoulders.

Maggie:
[15:41] Yeah, we’re all here for it.

Jewels:
[15:42] We could just all four hug you while you sign.

Taylor:
[15:45] You signed. Yeah, we could do like a tight bear hug cone situation.

Loren:
[15:49] From what it sounds like, it’s like we had a pretty relatively benign experience and it could have been a whole lot worse.

Jewels:
[15:57] The last year was really brutal. Right now is actually a lot better. Just as far as like things seem to be stabilizing. Pricing, you’re not having to put the crazy appraisal guarantees on every single offer only on very specific ones.
Things seem a lot better. A few things are starting to sit one or two weeks which is freaking the sellers out, even though that is still an exceptionally fast timeline for selling a house. The market’s getting…

Loren:
[16:22] It’s normalizing.

Jewels:
[16:23] Yeah. It’s not a healthy market by any means but it is getting a little more predictable. Okay, so it looks like you’re paying this last year, you paid a little over, well, I guess you didn’t have the house for the whole year. Based on your current mortgage payment it looks like in a 12 month time frame you’ll pay about $11,000 in mortgage interest. So you get to take $11,000 off your income before finding out what tax bracket your income falls in. That’s a pretty substantial benefit. Something in the range of like a $350,000 mortgage got you a $10,000 tax benefit. And you could have bought something up to $750,000. So you could potentially be getting like a $20,000 tax benefit in the early years of your mortgage.

Taylor:
[17:19] And it’s not something you can’t do if you’re renting, so it’s a big benefit of house ownership.

Loren:
[17:25] So what are some of the things that you can do to sweeten your deal?

Jewels:
[17:25] Zach’s gonna kill me if I publish all of the secrets.

Maggie:
[17:34] Well, one thing you can do is say that like you don’t care about the inspection basically. Be like regardless of what the inspection comes back, I’m still buying the house and then the owner will be like, cool, I know there’s a bunch of fucking shit wrong with this house, so I’m gonna pick you.

Jewels:
[17:47] Yes. So, the two big things that you can wave are that appraisal guarantee where you’re like waiving the appraisal and you’re going to make up the gap in cash at closing, if the property appraisal doesn’t come in at what you offered. So that’s a big one. But that, that’s a lot of money up front. And then the other one is what Maggie just referred to, which is basically waiving option. So you’re not gonna, you’re not going to have an option period at the beginning, you’re immediately going under contract and the earnest money is now at risk and you can still get an inspection, but it means that you’re not going to walk away for a cheap option fee if something comes back in the inspection. So you better, in all cases with a lot of these strategies, you better have a good team backing you up advising you on that, because if you have a realtor who is not familiar with actual housing fundamentals and stuff from each era and common house problems, you don’t want to trust their opinion on whether or not you should waive your option and and wave that inspection. But if you have a realtor or someone on your team you’re working with who has gone through the house before you put that offer in and has really looked at it and gone, yes, we pretty much know what we’re looking at here. There’s like a 10% gray area, but based on the age of the house, the updates that we can see have been made. You know, looking at the exposed plumbing to see if it’s copper, all of those types of things, then you can make sort of an educated guess that nothing’s going to come back in the inspection that’s a deal breaker. But you don’t want to just do that without having somebody who really knows houses.

Taylor:
[19:18] I want to say that my house came in at like 3, like just under, like 368 or something. And then I think I put in like 6000 or something to make up the difference.

Jewels:
[19:29] You might have. The other thing is if you didn’t have an appraisal guarantee, what normally happens, under normal market conditions where there aren’t 10 backup buyers waiting in the wings. What would happen is if you offered 375 and the value of the house came back at 370. That means you could walk away because it didn’t make value under normal market conditions and your earnest money may not be at risk depending on how your contract was written because that’s like a financing back out clause. And what you would do then is that opens up negotiation in the middle. You’re under contract, but you can still go back to them and say, hey, I’m not going to be able to make up that 5K gap. Are you willing to take that hit and we’ll just drop the offer price to 370, call it good or you might split the difference where each of you take half the hit. So each of you, like they lose 2.5 grand on their side and you contribute an extra 2.5 grand. So it’s usually more of a negotiation trigger if your appraisal doesn’t come in at or above value. Do you happen to know, or anyone happen to know what their mortgage insurance has cost?

Maggie:
[20:39] Mine’s about $100 a month. Oh it’s less than that, like $50 a month. I thought you were talking about home insurance. My home insurance is about $100 a month. My PMI is like $50 a month.

Loren:
[20:50] I don’t know what PMI is.

Jewels:
[20:50] You don’t have PMI if you put 20% down.

Maggie:
[20:53] I don’t have PMI anymore.

Loren:
[20:56] Sounds like a condition. Yeah. I’m really, I’m really PMI’ing right now. Really cranky. I’m PMI’ing right now.

Taylor:
[20:59] I have no idea what PMI is, I just pay what they tell me.

Jewels:
[21:11] Okay. So with a lot of the financing options that are available to us nowadays, you can put down as little as 5% or 3.5% or even 0% if you’re a veteran and you have access to certain programs. Now, what that does, it means the bank is taking on more risk up-front. And so if you put down less than 20%, they may require you to carry PMI, which is mortgage insurance. What’s the P stand for? Primary, property?

Taylor:
[21:37] Mhm. Principle?

Jewels:
[21:40] I should know this.

Taylor:
[21:40] Percy. It’s Percy.

Maggie:
[21:41] I thought it was property.

Jewels:
[21:43] Can someone Google that real quick?

Taylor:
[21:45] If you’re a woman trying to buy a house, they charge you pussy insurance, pussy mortgage insurance because you’re more of a risk if you’re a woman.

Jewels:
[21:50] Private mortgage insurance. So it’s wrapped into your payment already when you get it. And then what happens is once you have paid off and you have 20% equity in your house, like enough payments have gone by the PMI automatically falls off of your payments every month. There’s another way which is really key here in Austin because it can take a while for you to hit 20% equity in that to fall out if you get like a 3.5% down payment. But if you’re in a market that’s appreciating pretty quickly, within a couple of years, you can just get an appraisal done on your house to show the new value and then you get to count that new value above what you paid as equity. And if it puts you over the 20% mark, then that PMI can fall off early.

Maggie:
[22:42] That’s what I did.

Taylor:
[22:43] And so that means less payments for you per month or what’s the benefit of that?

Jewels:
[22:44] Yes. So you’re paying a little bit extra on your mortgage every month into this insurance policy that if you default on the mortgage, they take care of it with the bank.

Taylor:
[22:55] Got it. Okay.

Maggie:
[22:57] But once you hit 20% equity, then that just goes away. So if you refinanced your house because your house value just went up 50% or something, it would automatically fall off because it just puts you there.

Loren:
[23:11] I have another question because she brought up refinancing. Because everyone’s talking about refinancing their house right now because interest rates are so low. But when we bought, our interest rates was amazing.

Jewels:
[23:21] Yeah. You’re never refinancing.

Loren:
[23:21] That was what I was saying to Chris in the car, I was like, does this mean we will never refinance our house? And I guess that just answered my question.

Taylor:
[23:22] What was your interest rate?

Loren:
[23:22] 2.5%.

Taylor:
[23:23] You fucking bitch.

Maggie:
[23:23] Yeah, no, you’re golden for forever.

Jewels:
[23:31] That is insane. Yeah, there’s just no way, no way.

Becca:
[23:32] Was that, was that because of your timing or y’all just had really stellar fucking finances?

Loren:
[23:47] Um I think it was definitely timing. I mean we very much tried to make, we had great credit when we came in. We did all of the things Zach told us to not do, which was not buy a car or not, you know, co-sign anything. But I really do think it was just because of the timing, like interest rates were incredibly low when we got under contract, it was December.

Jewels:
[24:03] Mhm. And then you were under contract for sort of an extended period of time because your house was still being finished building and you have a really badass mortgage broker who kept an eye on the rates and somehow she managed to lock it even lower than what she promised you.

Loren:
[24:14] Yeah, and she, but she was also telling us that we had to get things, once the house was done, she very much encouraged us to get things going quickly because I guess is there only some amount of amount of time you can keep that? So if I think if we had stretched out any longer we might not, we might have lost it.

Jewels:
[24:44] Yes. So when they, when your mortgage broker locks your rate that usually expires within like 30 days.

Loren:
[24:49] Oh well then how did we get closed? How did we keep it then?

Jewels:
[24:51] So you wanna get closed before those 30 days. because she didn’t lock your rate because she knew the timeline was long. So she kept watching and watching. She can also pay.

Loren:
[25:00] Oh my God she’s awesome. I gotta buy her some flowers or something.

Jewels:
[25:03] She is amazing.

Taylor:
[25:06] She’s pregnant now. Buy her some baby shit.

Loren:
[25:07] Oh good for her. I will buy her baby shit.

Jewels:
[25:17] She is, yes, she um, so they can watch and they can also sometimes pay to extend the lock but then that starts costing you money right. So it’s this real juggling optimization.

Taylor:
[25:20] So, in other news I was looking at. I really like this US bank app. It’s very user friendly. But I was looking to find my mortgage. My interest rate. And it’s actually lower than I thought it was.

Jewels:
[25:30] What is this.

Taylor:
[25:33] I’m at 3.375. Which is really not bad. I thought it was like, I thought it was 3.75 and not 3.375.

Loren:
[25:07] You’re fine, dude, that’s amazing.

Maggie:
[25:45] Even 3.75 would be pretty good.

Jewels:
[25:46] Yeah, that is, 3.75 would still be amazing. So we just did our refi and that’s because we bought our house in 2014. I guess our conventional mortgage happened at the end of 2015 and our rate was somewhere in the mid-4s because that’s what interest rates were then. And I was still very happy with that.

Loren:
[26:04] Also my parents were saying on their first house, I think their interest rate was like 12%, you know, it’s something insane, you know, so we’re very spoiled.

Taylor:
[26:08] My mom said the same. It was like, yeah, my mom was like 18%. I mean, they thought they were getting a deal at the time. But the house also costs like 1/5 of what it would now.

Loren:
[26:15] So, Becca I’m assuming if you do get an under contract interest rate for you would be pretty low as well.

Becca:
[26:20] Yeah, so I was quoted a pretty low one when I talked to the loan officer. But I think I just asked Zack if we locked anything in and he said something about, we have to wait till the markets open on Monday. Something. Something, something something.

Jewels:
[26:41] It’s a banking thing.

Taylor:
[26:43] Yeah. But his estimate is like 3.25. So I don’t yeah. When they pulled my credit I have had exceptional credit and um yeah, whatever else it is they look for.

Jewels:
[26:51] Well, and interest rates are, interest rates are super dynamic. They’re not fixed. So the actual rate that the mortgage broker can get you depends on what’s available from the mortgage providers, what they’re actually willing to take as an interest rate, right? So like a few years ago, they weren’t going to sell us a mortgage for less than four and a 1/2% or something like that. And now week to week, day to day, it completely changes. But right now it’s sitting somewhere in that three range for if you’re a really good credit holder.

Loren:
[27:32] Are you under contract?

Becca:
[27:33] No, I just did it. I signed the papers.

Taylor:
[27:33] Oh my God, you did it.

Maggie:
[27:38] It’s not even 5pm yet.

Taylor:
[27:40] Oh my God, Becca is melting into the floor right now.

Taylor:
[27:49] How do you feel?

Becca:
[27:33] Awful. I kept visualizing myself as a really powerful woman who owns fucking property and it helps.

Taylor:
[28:04] This is the first step.

Maggie:
[28:04] Gone forever? It was my ring.

Taylor:
[28:08] So much symbolism.

Becca:
[28:09] It’s nice being in a room full of women who own fucking property. It made me feel better.

Loren:
[28:16] Because we were all peer pressuring into you to do it.

Becca:
[28:17] Yeah, but you were also like meanwhile talking about all the horrifying things about owning a home, just like signing this, like sweating and dying.

Loren:
[28:26] To be fair, I don’t think I’ve, well okay, we’re very new homeowners, but I haven’t encountered anything truly horrifying yet.

Becca:
[28:33] Also I just submitted an offer on a duplex in Austin. Everyone is putting in way way, way over their offer and I put on $5000 over the offer, so this is just the first step in the process of buying something.

Taylor:
[28:53] For sure. For sure. You might, there’s a good chance you won’t even get it.

Maggie:
[28:57] Eventually you’ll be immune to the stress.

Becca:
[28:58] Yeah I feel like the first, I had to go through it the first time. I had to go sign those fucking papers and then get out the other side so whether it’s accepted or not I feel successful.

Loren:
[29:13] I bet it’s accepted though.

Jewels:
[29:14] Maybe you’ll be one and done. You could be like Maggie.

Becca:
[29:16] Maybe I’ll be one and done. That seems bad, that seems awful. I don’t know.

Maggie:
[29:17] Yeah, I was a one and done.

Taylor:
[29:19] I was a one and done.

Loren:
[29:23] We were one and done. And then my friends that we recommended to Zach were one and done. Then again, Max was also many and done.

Becca:
[29:24] Wait. So this is the only, this is the only offer you put in was in this house, the only offer you put inside and the only offer?

Loren:
[29:40] I mean did Zach suggest the offer you put in?

Becca:
[29:40] He suggested 5-10 over and I was like okay let’s do 5, and he was like yeah that sounds great. Um and he didn’t make me feel bad about it so I think he did think it sounded good. And I, basically our unanimous thought is we both really like the property. I think I like it a lot more than Zach because I like Round Rock a lot more than Zach does. For like financial reasons he likes Austin more. But also for financial reasons I like Round Rock more, and yes this was far more in my comfort zone price wise than some of the other stuff we were talking about even if they made sense long-term. Short-term, at least as of right now I wouldn’t be able to sleep through the night putting in offers on some of those properties.

Jewels:
[30:36] It’s good to know that about yourself.

Becca:
[30:36] Yeah, and I might get there just like, I never thought I’d want to buy a duplex, I thought it was way too big. And then I had a like, well Julie broke it down for me and then Zach broke it down for me and then Zach broke it down for me, and then Zach broke it down for me. And then finally I was like, okay, and I spent a week on it and then it took me being with my mommy getting coffee and her being like, I think it makes sense. I was like, okay. Hey, but I don’t know if anyone’s ever done a podcast with someone live signing an offer to put in and that could be something.

Loren:
[31:08] Yeah.

Becca:
[31:12] Just, and hearing them break down.

Jewels:
[31:14] Real estate podcast to the next level.

Becca:
[31:17] I’m sure there’s a podcast where you hear someone who’s signed a lot of things like that do it.

Jewels:
[31:22] Not in the moment, though not in the stress. That realization, this isn’t fun anymore.

Maggie:
[31:28] Yeah, it came quickly.

Becca:
[31:32] It was really fun yesterday before it mattered and then today it was so much less fun. It was crazy.

Maggie:
[31:36] And then once they accept your offer, it’s going to continue to not really be that fun.

Becca:
[31:41] No, that’s, it’s not a right now problem.

Maggie:
[31:47] Just so you know what you’re walking into.

Becca:
[31:52] Maybe let’s hone in a little.

Jewels:
[31:54] Let’s run through the rest of the tax advantages and then maybe jump down to the checklist part that kind of takes you through from a year before you buy a house until after you buy the house. And just like here are the steps, here’s the money you need, all that kind of stuff. Okay, so we definitely talked about mortgage interest. The next big deduction that you may be eligible for is to deduct your mortgage insurance. So if you have PMI on your mortgage and your adjusted gross income, like we talked about earlier, if it’s under 100,000, then you’re eligible to take that as a deduction, your mortgage insurance total. Um, and then it kind of phases out up until an adjusted gross income of 109,000 by current rates. I believe current rates. If you make more than that then you’re not eligible for that right off, your mortgage insurance doesn’t tend to be a very expensive thing. I think Maggie was saying hers is maybe $50 a month. Was. Sorry, before she appraised out of it. So she appraised out of it early right by cashing in on the new equity that she got in her house from the value’s just going up. So without her even having to pay in the full 20%, she got to appraise and claim the appreciation as her 20% equity.

Becca:
[33:09] That is crazy, how quick was that? It was wild.

Maggie:
[33:12] I have officially owned my house for three years now. I put 3% down just for reference.

Becca:
[33:16] Wow.

Jewels:
[33:18] Right. And that’s actually on a like, you did a full on refinance, you don’t even necessarily have to refinance your mortgage to appraise out of mortgage insurance. You can just get an appraisal done where they will say, oh yeah we’re going to give you credit for that additional value.

Becca:
[33:35] Okay, cool, that’s cool, you’re cool.

Maggie:
[33:39] Thanks Becca.

Jewels:
[33:43] Another much more complicated deduction is for mortgage points. And this is something if you have, if you purchased mortgage points when you got your mortgage, you probably know you did. So you might know what those are.
If you don’t know what those are, you probably, they probably don’t apply to you. But at a very basic level this involves paying money upfront at your closing in order to lower your interest rate. So you’re basically paying money when you get your mortgage in order to have a lower interest rate for the life of your mortgage. If you do that, you can often write off that amount that you spent on the mortgage points over the life of your loan. There are certain circumstances in which you can write that off all in the year that you buy the house. There’s like nine criteria. It’s all listed on the IRS. If you’re not sure, you can look at your loan documents from when you bought the house and you’ll be able to see the mortgage points in there or talk to your mortgage broker. Obviously they’re going to know and they’ll be able to tell you there are a couple different types of mortgage points too, they’re not all deductible, but the ones that you pay for generally are. So that’s like a, that’s a really weird one. But it is a thing just to have on the radar in case that is something you did.

Becca:
[34:57] Okay, interesting.

Jewels:
[34:58] Um, and then there are deductions called salt deductions when you file your federal taxes and that’s state and local taxes. There are a lot of different things that go into that. But one of them are your property taxes if you live in a state with property taxes. So here in Texas, obviously we have property taxes for Texas – do we have Texas property taxes or just City of Austin?.

Maggie:
[35:20] Pretty sure it’s Texas, but I could be wrong.

Taylor:
[35:23] I honestly don’t even know.

Jewels:
[35:25] Okay, well you might have state property taxes and local property taxes for the town or city you live in, and this is a way for you to deduct those taxes from your income when you go to file your federal income taxes. So if you live in a property tax state that can lower the taxes you pay to the federal government in your income taxes. Because you’ve already been on the hook there a bunch of other taxes that go into that as well. Like if you are in a state with sales tax and stuff I think you can also tally those up throughout the year. If you really want to work hard to do that, you can sort of keep track and then get credit back on your federal taxes.

Maggie:
[36:04] Based on a very quick Google, it looks like we here in Austin only pay county, so Travis County or city property taxes and not also a separate state tax.

Jewels:
[36:10] Okay, that makes sense.

Maggie:
[36:18] And yet it’s uh, important, I don’t know, maybe interesting to note that Texas has high property taxes in general because one of the reasons for that is because we don’t have income tax. And I believe that one of the only other states that does that is Florida and I could be wrong, there might be another state, but I think it’s only Texas and Florida that don’t have income tax. Therefore both those states have higher property taxes.

Jewels:
[36:44] They rely on property tax to fund school district initiatives and everything else in the state. Most states will fall into either a property tax state or an income tax state, or they’ll have a mix, and both of those will be lower because they kind of balance each other out.

Maggie:
[36:49] Also I lied. There’s nine states that don’t have income tax. It’s actually a pretty decent mix. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Washington.

Becca:
[37:07] Wow, that is all, that is a splattering. Yeah, really diverse, like shockingly diverse I would say if I may.

Jewels:
[37:07] It’s a pretty diverse group politically right there. Also sales tax, you know, is the other big one for states, You have like income taxes, property taxes, and sales taxes that they kind of figure out where they’re pulling their main revenue from.

Becca:
[37:21] Okay. Interesting.

Jewels:
[37:32] Okay, and then the other big thing, obviously, I am not an advocate of selling your house, I think it makes a lot more sense financially over the long term, if possible that you keep a primary residence and turn it into an investment property, even if you need to buy a different primary residence. The math is kind of really beautiful on that and you can see that in our mortgage math breakdown.

Becca:
[37:55] Fuck yeah, you can.

Jewels:
[37:57] Um but if you are in a situation where you think it makes sense to sell your house or maybe you made an investment that wasn’t super great and you want to roll that money into a better investment, so you really do want to clear this one in order to free up that capital. Um, if a house is considered your primary residence, your capital gains taxes on the profits you’ve made since you bought are shielded up to a certain amount. So as long as you’ve lived in your house for two of the five years leading up to the sale, you can claim it as your primary residence. And there are no capital gains taxes, charges on the profits up to 250,000 if you’re single and up to 500,000 if you’re married filing jointly. So for example, if you bought a house 20 years ago that was 300,000 and you are single and you sold it for 550. Your profit on that was 250,000 and you don’t pay any capital gains on that.

Becca:
[38:55] Wow.

Jewels:
[38:56] If you sell it for 600, you’ll pay capital gains taxes on 50,000.

Becca:
[39:02] Okay.

Jewels:
[39:02] So anything above that 250 mark. Again, if you’re married filing joint, I mean it depends, you know, it’s all of these different.

Maggie:
[39:05] So get married. I mean it depends how much is your house worth, then get married.

Becca:
[39:08] That’s actually super interesting.

Jewels:
[39:15] Yeah. Well, and it is interesting all these different tax benefits. Some of them are the same whether you’re single or married filing jointly and then some are half.

Maggie:
[39:19] While we’re on this topic I want to recommend a book that much of the real estate people recommend. It definitely like has some moments that you should take with a grain of salt but overall good. It’s called Loopholes in Real Estate and it’s basically about all the different tax things you can do that are only available through the purchasing and selling of real estate.

Taylor:
[39:49] Oh, that’s cool. Is it a long read or is it like pretty quick to the point?

Maggie:
[39:50] No it’s like maybe 200 pages.

Taylor:
[39:55] Okay. Yeah, that sounds awesome.

Jewels:
[39:57] It’s such a sexier title than my favorite real estate tax books, which are like ‘Tax Advantages of Real Estate’ and ‘Advanced Tax Strategies for Real Estate’.

Becca:
[40:10] Life Hacks and Hot Takes on Real Estate Tax. There’s something there.

Taylor:
[40:10] I love it, getting raunchy with real estate.

Becca:
[40:20] Oh my god, yeah, getting in so deep.

Maggie:
[40:26] I have mixed feelings about the term loophole just because I feel like it has a negative connotation, but I think it is, I mean it’s true there’s some loopholes, quote unquote loopholes which are just really beneficial to know about.

Jewels:
[40:41] I think that’s actually a really good thing to talk about because any time there is like a certain privilege granted in the tax code, it is called a loophole. But they’re not accidental. Right? The way that we refer to them as loopholes makes it sound like to us this is a loophole that was an accident that people are taking advantage of.

Becca:
[40:59] We like are hacking the system.

Jewels:
[41:02] And in reality, the tax code is a way for the government to encourage certain behaviors and discourage other ones. So all those loopholes are encouraging in this case, the tax code is largely written to benefit real estate investment. They’re not loopholes, they are intentional benefits to encourage that behavior because it benefits the country right now. And if that changes in the future, the tax code will change. The tax code is extremely dynamic. But I think that’s a great thing to point out because yeah, loophole definitely if you’re taking advantage of the loophole…

Maggie:
[41:33] It feels a little dirty.

Jewels:
[41:33] It feels really slimy and I think the big people who paid the lobbyists to get the loophole put in that encourages this, want the masses of us to feel slimy about it so that they get to keep that advantage over us because we’re not going to go through the loophole.

Maggie:
[41:49] Well and that’s part of it too. I was talking to one of my best friends who is not on this podcast about the Roth conversion ladder and his reaction was, oh yeah, another fucking loophole for the intelligent and like rich to take advantage of and I was like but you can to, you just have to learn about it like, which is hard I know, but like you just have to learn about it and then you can do it.

Jewels:
[42:15] It’s like the whole Roth system was literally written to benefit us as the mass market person, but it is highly used by extremely rich people because they can benefit even more so from it because of the way it was written.

Maggie:
[42:28] Well and people who know about it.

Taylor:
[42:33] And they like pay people to like tell them about it.

Maggie:
[42:36] Yeah, so that’s what, loophole, not necessarily a bad thing. It does have an incantation and a lot of people and the at least the way I feel about it is, it’s like oh, you know about this loophole because you’re some rich person who knows loopholes, but like, I don’t think that’s the right way to really think about it, at least in real estate and in this scenario.

Jewels:
[42:50] Okay, does someone want to run us through some of the checklist part? Someone feel like that?

Becca:
[43:02] Yeah, I think it’s appropriate that I do it given everything. I know nothing and haven’t done shit. No, it’s just like, it’s a checklist of shit you should do when you’re buying a house or whatever. It just seems relevant. Okay, so Julie’s got a checklist for us and it’s really good. And also if maybe you didn’t do anything on this checklist, but you already put in an offer for a property, it’s fine. Checklist.

Jewels:
[43:32] I think you did some of this stuff.

Becca:
[43:32] Yeah, I did some of this stuff for sure. Okay, so ideally 6 to 12 months before you start looking for a house. So this is like serious prep work – you need to interview realtors and mortgage brokers. We have shit talked shitty realtors rightfully so, and we could really keep kicking that dead horse. But you have to find a good fucking realtor. If you get a realtor and they don’t get great vibes, you need to back off because you need a realtor who is actually going to speak critically about a property. If you walk in and they’re not speaking critically about it, they’re not helping you, they just want your money, get the fuck out and find someone better. Just ask around, talk to people who have actually worked with people and not know someone who worked with someone. Um and talk about their experiences and that’s why you need to start 6-12 months in advance because it takes time to find a good realtor unless you’re in Austin, we can hook you up hard.

Taylor:
[44:27] If you’re in Austin, we have the company for you. Best crawfish boil I’ve ever been to.

Becca:
[44:30] And it is, Yeah. Yeah. So um seriously the best. Oh my God. I just realized I’m like a proper client now.

Taylor:
[44:41] I got fucking gypped out of my crawfish boil because I bought my house during the pandemic. I still want my crawfish boil.

Jewels:
[44:43] Don’t worry, we all want that crawfish boil.

Becca:
[44:47] Um, okay, so mortgage brokers as well as your realtor might have someone, they recommend you might off like look for some second opinions. Like please do that. Talk to your bank, do whatever you want to do. Um, meet with your mortgage broker. Oh yeah. So you’re gonna want to meet with your mortgage broker way in advance. So they have all your finances. And there’s a lot of documents, not like a billion documents, but like a lot of documents, basically the same amount of documents you need to like file your taxes and maybe a tiny bit more. Um, so yeah, meet with them now if you want to buy in the next year so that you can just get it all filed away and you’ll probably have to update it once you get closer to putting in an offer. But get that done, check it off your list.

Maggie:
[45:28] And also, if you meet with them earlier than they can give you tips on, hey, here’s some ways you can move your credit in the next six months before you put an offer or um, here’s, yeah, I lost that train of thought, but that’s basically was trying to say.

Jewels:
[45:41] Well in the first, if you’re meeting with them a year before you’re actually planning, you don’t necessarily need all the paperwork. You will when you are actually trying to get your pre-approval. But you can have a meeting with them, sit down and say, here’s my general income, here’s my financial picture. Here are the debts that I have and one, they can give you an idea of what you’re going to qualify for. Just a very top level idea of that. And then they can also point you in the right direction as far as like clear these debts, don’t worry about these ones. And oftentimes, what we think we should do to make ourselves look better for the bank isn’t what the banks actually care about. So definitely go meet the mortgage broker six months to a year before you want to buy and they can kind of clean you up in the way that banks are looking for because it’s very different than what we think.

Taylor:
[46:28] Totally, yeah, you can get your credit up, you can do all these different things that make you look like a more, you know, viable or more attractive buyer because I, you probably already mentioned this. But Becca talks about how she had a ton of cash on hand and like thinking like, oh, this will make me look really attractive because I have no problem like putting down like a big down payment because I have all this cash on hand. But in reality when you mentioned that the your broker is like, no one gives a shit.

Becca:
[46:58] Literally word for word, no one gives a shit. Yeah, I was like, yeah, so I am a really good saver and I’m not a high earner, but I can like show through my bank statements how much I save every month and like, surely that shows that I can afford X mortgage. And she was like, yeah, no one gives a shit. Unless you’re paying for the house in cash outright, they don’t care at all how much money you have, which should show you how successful they intend you to be on these sorts of things. But I don’t know.

Jewels:
[47:31] Banks are the worst because they yeah like they’re looking fo, they have one box, one type of box to fill and if you don’t easily fit in it they don’t care. So if you don’t have a W2 job with, they count that as like income into the future as if you have job security. Which, hello. No one has job security.

Taylor:
[47:52] No one with the W2 has job security more. They can literally fire you at any moment.

Jewels:
[47:54] Right. They would they would rather take a W2 person with no excess cash in their bank account than take Becca who has plenty of cash in the bank account and a long track run of being self-employed.

Taylor:
[47:57] Who could cover her mortgage for like up to a year of unemployment.

Jewels:
[48:08] Banks are crazy. So count on your mortgage broker to really lay that out for you and help package you. They are your advocate as far as your financing goes, so be honest with them.

Taylor:
[48:16] Which like, you know when I was getting my mortgage, I’m a freelancer and I’m not a high earning freelancer either. So I, the only way I was able to get a mortgage, any bank to back up a mortgage was to get my mom to co-sign with me and I had to beg her like, the most begging I’ve ever done. And so unless you’re like super fucking privileged and lucky and have someone that’s willing to co sign with you, it’s going to be really hard to get a mortgage from a bank if you’re a freelancer or don’t have a traditional W2, but if you do, if you are a freelancer and you don’t have a traditional W2 and you really want to buy property…

Jewels:
[49:02] Well, and being a freelancer doesn’t automatically mean that you have to have a co-signer, but you typically have to have a certain amount of time that you’ve proven so like two years worth of tax returns as a freelancer, and they kind of base your income off of that.

Becca:
[49:18] So okay, so yeah, we talked about the mortgage broker. Next on the checklist is like the best part and that’s house shopping. That’s when you wake up in the middle night, you can’t sleep. You look at Redfin, you scroll, scroll, scroll and you get emails from your real estate agent automatically every day that gives you some properties and you’re just like, okay, this is great. And it’s just a lot of fun. It’s very hypothetical and you’re all very removed from it and you get to pull houses up and you’re like, don’t you love this? But then.

Taylor:
[49:47] Sorry, have y’all seen the SNL episode, The Zillow.

Becca:
[49:52] Yeah, it’s like the new dating app.

Taylor:
[49:53] It is so fucking good and you haven’t watched the Zillow SNL episode. You have to watch that. It’s like literally describes my entire, like, last three years of house shopping.

Jewels:
[50:00] We’ll put the link in the show notes. It is so yeah, so enjoyable.

Becca:
[50:06] Okay, then it’s decision time. So you find a house that you actually wanna move forward to, you know what that means? Once you’ve found the one, there’s a series of things that happen, some of us are learning. The first thing – okay, so yeah, there’s under contract, which means they’ve accepted your offer, right Julie?

Jewels:
[50:22] Correct.

Becca:
[50:28] Uh the,n there’s the option period where you’ve got, a week-ish?

Jewels:
[50:31] It depends on the market here in Austin. It’s been crazy. So there’s been like three day option periods, which works as long as your whole team of professionals… like if your realtor has an inspector that they know they can get out within that period, you can’t offer a three day option period if you can’t get done in the option, what you need to do. But if you have that really well built team already set up where like obviously Zach would have called our preferred inspector and gotten verification that he could make it out to that property within the three days. More often, your inspection periods going to be 7-10 days in most markets.

Becca:
[51:09] Yeah. Mine’s either three or 7 days. I’m not sure. There was a lot of 3 days written around and a lot of 7 days written around. So that’s the option period. That’s when you get your inspection done, you have to get it done in the option period. You pay a little fee to even be able to use the option period and then there’s the appraisal which happens after the option period ends, I’m guessing?

Jewels:
[51:33] Yeah, so while you’re under contract, typically your mortgage broker will order the appraisal and then depending on how backed up the appraisers are, it should happen sometime before you need to close. Right now, there’s like such a shortage of appraisers that people aren’t even picking up the appraisal jobs and closings are having to get pushed out and stuff like that. But usually your appraisal comes back a week or so before you’re close date, so you’ll know what you’re dealing with.

Becca:
[52:00] So we’ve got that timeline right under contract option, period, inspection, appraisal and closing. When you close, things to know is that your homeowners insurance needs to be accounted for, and you’re eventually gonna have to fight for your property taxes. My assumption is that, that’s an immediate issue, but you tell us. Well, really break down. Um, I mean, well homeowners insurance, we kind of addressed. Have we addressed that already today?

Maggie:
[52:27] Yeah, we talked about it when we were talking about escrow a little bit, is that it’s often times just looped in with that. If it’s not, you’ll be aware.

Jewels:
[52:34] Okay, so the other thing to look into after you buy your house is whether or not your state has homestead protections and that’s essentially if you designate your primary residence as your homestead, that comes with certain benefits like that might be protected if you end up having to go into bankruptcy. Your debt collectors cannot come after the value of your house, stuff like that. Um, as long as it is designated as a homestead and it also in the state of Texas gives you certain benefits where it caps the percentage by which your property taxes can go up each year. So with us living in a pretty high property tax city, that’s very important. So as soon as you buy your house check to see if homestead protections are available in your state and how to register for those and go ahead and get yourself registered for your homestead. And then when property taxes come around, there are usually ways to fight the property taxes. So each year in Austin specifically, or in Travis County, the appraisal office values your house based on the increase in the market and sometimes by potentially very shady things like illegal access to MLS data on what your house actually sold for.

Becca:
[53:48] Oh, Jesus, oh my God!

Jewels:
[53:49] This happened a couple of years ago real bad. Um, and they will try to bump up the value of your house, which then bumps up the amount of property tax you have to pay because your property tax is a percentage of your property value. So when they try to increase the value, you can go in and you can fight against that increase and argue that your house value has not increased that amount and oftentimes you will win that battle or at least fall somewhere in the middle, which will save you money, especially it’s sort of a compounding interest thing. The sooner you can keep the value down, if it’s capped by homestead protections, it can only ever go up so much so fast, so it’s kind of keeping the compounding interest of those property taxes depressed a little bit.

Maggie:
[54:33] So this is a situation where my bad appraisal actually sort of benefited me because the city of Austin put my tax rate very high and I had a bad appraisal to show them that my house was not worth nearly what they thought it was.

Taylor:
[54:49] That’s hilarious. That is really hilarious.

Jewels:
[54:52] So maybe at the end of the day, you came out ahead just because you were able to fight the property taxes last year and then get a new appraisal this year. That doesn’t have to go to the county.

Maggie:
[54:56] Exactly, it was sort of a bittersweet moment where I was like, well at least I can use it for this.

Taylor:
[55:02] Yeah, that is a really good point. Yeah, I remember actually this I think is something good dimension to when I first bought my house, I was getting all sorts of mail, I had no idea what it meant, I just kept taking pictures and sending them into Zach and being like, what does this mean? Is this legit? And he was like, no, it’s all trash, don’t respond to it. But half the time it was the fucking city trying to get me to send in a form, telling them how much my house sold for and it seemed like legit, it was like, you know, let us know like, you know, we saw that you purchased this house, let us know what the value is. It seems like very formal like, oh this is what everyone’s supposed to do and it’s a fucking scam. Well it’s not a scam, but like they’re trying to figure out how much you paid for it so that they could increase your property value. It’s super sketchy and don’t fill it out.

Maggie:
[55:48] Well there are so many that are like you qualify for this now that you have a mortgage. Yeah I still get shit, yeah I still get shit all the time and I just throw it immediately in the trash. But they are very legitimate looking.

Taylor:
[55:50] Banks, other banks send me letters like once a week. Still, I still get them. They look very legit, but if you read the very bottom, it says this is not associated with your current home loan owner. So like it looks like it’s something like, oh you should, you know, do this and you’ll get money back blah blah, refinance and it’s just other banks trying to steal your business away basically.

Jewels:
[56:16] And they are so manipulative because we just refinanced our house, we’ve started getting all that mail again and I got one last week and I was showing it to Zach and I was like this, it is insane that this is legal. And like if it’s folded up in thirds, the 1st third that you see when you open it up has like my mailing address and then it has the Home Loan Experts which was our mortgage provider, like the mortgage broker in like big bold letters and all of their information. And then off to the right on that third is the disclaimer that clearly says this is in no way associated with the Home Loan Experts and this, that and the other.

Taylor:
[56:50] That should be seriously, that should be illegal.

Jewels:
[56:51] But it looks like it’s coming from them and then you’re you’re just confused by this mismatch. And of course your brain is like this is real, this is real. And the lingo that they used to do in the disclaimer is the type of stuff we all just gloss over anyways, it is so manipulative.

Maggie:
[57:09] Be wary of any mail you get after purchasing a home or refinancing a home.

Jewels:
[57:10] Do not hesitate to reach out to your realtor and ask them for a while until you get used to like, okay, I’ve seen this thing again, I’ve seen this. Definitely reach out before you start providing any information or money or…

Maggie:
[57:18] Yeah, there’s a lot of scams out there for sure. And it sucks, but it’s part of it, I guess.

Taylor:
[57:32] Yeah, once you buy a house, people are like, oh, you bought a house, let me introduce you to all these scams you didn’t know about. Here’s a bunch of mail that you just need to throw right into the trash.

Becca:
[57:40] I know when I when I filed my LLC for my business I started getting these crazy, it’s like bills. Bills would come in like you owe $60 to… and I was like how do I already owe money? I owned this business for almost three years and I’m just an LLC now and now I owe money and it was all like just shit that made it look like it was bills and it was just like, if you want to have the following posters like you have to legally have posters up in your place of work.

Maggie:
[58:06] Oh yeah, I got that too and I almost fell for it. Like each business is legally required to have these posters like in their place of business and you have to have this. If someone comes and inspects you, you have to be able to show it to them. If you pay us money like we’ll take care of it.

Becca:
[58:24] Yeah. But it made it seem like it’s a fee you have to pay when really you can print those off online and post them on your wall as a place of it. Because you do have to for certain services you have to have these posters on your wall.

Jewels:
[58:35] But you don’t have to pay someone $60 for the privilege.

Becca:
[58:37] No, there’s no money involved.

Maggie:
[58:38] Yeah, you just print them yourself.

Jewels:
[58:42] Let’s also just talk about all the different types of money you need during the home buying process.

Becca:
[58:47] Cash isn’t trash. Cash is very important all of a sudden.

Maggie:
[58:47] Cash is not trash.

Jewels:
[58:55] Okay, so when you put in an offer on a house, you’re going to have both an option fee and earnest money. So that option fee is for the option period typically 7 to 10 days right after you go under contract. That’s the amount of time you have to get the house inspected. Really consider whether or not you want to move forward and if you exit the contract during the option period then you will lose that option money. But you get your earnest money back. The option fee is typically not very high even though it’s a lot higher now than it used to be. It’s often like $500 in Austin I think.

Taylor:
[59:29] Yeah, I think mind was $500.

Jewels:
[59:30] Used to be like $100 option fee for 10 days. You know that was like super cheap to force someone to take the house off the market. And then your earnest money is typically a percentage of the price.

Taylor:
[59:36] Sorry, the option money, you don’t get back, right. That’s just like here’s money for taking your house off the market.

Jewels:
[59:40] It’ll all go into the amount of money in your deal at the very end. It’s just money you have to front. Like you go under contract, you have one or two days in which you have to actually deliver an option check and an earnest money check,
To the title company that go into escrow and they’re sort of just held in case you back out, then they give it to the seller that you backed out on. So then your earnest money is typically a percentage of the value unless you’re really trying to overshoot it.
But often I think that falls in with like 1-2% of the price you offered you’re going to give in earnest money. And what that means is that if you back out while you have the house under contract after the option period, if you back out you will lose that earnest money and that’s usually a sizable amount sometimes. I mean no one wants to be out, Becca you said yours is 4,500? Like that’s a substantial amount of money to back out on. But what it’s doing is it’s telling the seller that you’re trying to buy the house from that you’re serious. Like I’m putting this cash on the line, I’m committed to this deal. And so that’s the purpose of the earnest money. So these are things that you need basically when you go under contract. Then when you get to the end of this and you’re actually going to close on the house, you have a couple of costs that go into that. So you’re gonna have your down payment which you know, we’ve talked about, there are some really low down payment options like 3.5% or 5%. As long as you’re comfortable with that and the numbers make sense for you, which personally I think that going for a lower down payment can be a really great option if it allows you to keep more cash in. The bank has an emergency fund for that property.
So that’s sort of why I advocate more for the low down payment than the higher one. Because if you have to put 20% down, and that drains all of your emergency fund then you’re living a lot closer to the edge as far as losing that property than if you put down 3.5% or 5% and got to keep that other 15% in an emergency fund that’s going to cover multiple months of mortgage. Or if you know something really happens to the house.

Taylor:
[1:02:01] Well what’s the benefit of then putting down a high, why wouldn’t you just always do a lower person?

Jewels:
[1:02:05] So if you’re under 20%, you just pay PMI and then if you’re worried about like your cash flow, your monthly payment, obviously those are going to be higher, your monthly payments will be higher if you don’t put as much down. So if that affects your cash flow and what you care about, you know, those types of things. But so you’re going to come with your down payment money and then there are also closing costs and the closing costs include things like mortgage broker fees and if you have title costs where they had to clear the title and make sure that everybody who had an ownership right over the house has signed off on it being sold to you. Those are the types of things that go into closing costs. I think if you estimate right now in Texas about 10 grand that usually covers it. So it’s gonna be like your down payment and your closing costs and your mortgage broker will lay all of that out before you show up at closing because you have to show up at closing with either literally a cashier’s check or having wired the money. If you are going to wire money to close on a house, be very, very careful because this is another part of the industry that is extremely scam written because you know, wiring instructions are sent via email and so scammers, if they’ve picked up on the fact that you’re about to buy a house, we’ll send you wiring instructions looking like your mortgage broker looking like the title company.

Becca:
[1:03:22] That’s awful.

Jewels:
[1:03:23] And then, and you will wire 10s of thousands of dollars or more to this random offshore account.

Taylor:
[1:03:30] That’s horrifying.

Maggie:
[1:03:32] You’re never going to get that back.

Jewels:
[1:03:34] That’s right. So wiring money is not necessarily something to be scared of, but just be very mindful when you’re going to do it, you can always pick up the phone, call your realtor, call your mortgage broker, call the title company, verify the wire information before you send the money.

Taylor:
[1:03:43] Which is what Zach told me to do, which is what I did.

Jewels:
[1:03:51] Yes, I believe it’s usually the title company because they’re the ones who are like wiring the money to.

Maggie:
[1:03:56] I’m trying to think back to what I did. I think I showed up with a check in hand.

Jewels:
[1:04:00] I usually show up with the check, cashier’s check.

Maggie:
[1:04:02] Yeah. I had a cashier’s check, which is like a $20, $10 fee to get the cashier check written from your bank. But to me, I was like, I would rather do that.

Jewels:
[1:04:08] I’m nervous enough driving across town with that check.

Maggie:
[1:04:15] Yeah, shaking.

Taylor:
[1:04:17] No, I like I called them and was on the phone with them like as I was doing like reading it, confirmed it sent and I was like did you get it? Like tell me right now.

Jewels:
[1:04:28] Okay. And so if you happen to, please, I hope this never happens to anyone who’s listening to this. If you ever happen to wire it to a scam, get in touch with anyone you possibly can immediately because oftentimes if you get on it really fast, the FBI can sometimes recapture those funds. If they can’t recapture within 24 hours, they usually can’t. Like once, 24 hours has gone by, the money has been moved through enough other accounts. But if, if they can get on it in the first day, sometimes they can recover it.

Maggie:
[1:05:02] Do the cashiers check Becca.

Becca:
[1:05:04] That’s absolutely as soon as y’all listed, I was like, okay, cashiers check.

Taylor:
[1:05:05] It is horrifying having a cashier’s check with like $30,000 on it though.

Becca:
[1:05:11] I’m just gonna make, like I want to hold it in a little, I’m gonna get one of the Baby Bjorns and I’m just gonna put it in front of me.

Jewels:
[1:05:23] And not to like scare anyone, but hopefully just to prevent the chance that anything would happen. It’s a pretty anomalous circumstance, but it would suck if it’s you.

Maggie:
[1:05:33] I consider myself a pretty intelligent person and I have almost been scammed a number of times.

Jewels:
[1:05:38] Totally.

Taylor:
[1:05:39] Oh yes, like people scammers are not dumb. They really good on finding ways to make things look legit.

Maggie:
[1:05:46] When I hear like people preying on the elderly, it makes me so mad because I’m like, I’m prone to being scammed.

Taylor:
[1:05:49] It makes me so mad too. Oh my god. Yeah. Yeah, it’s so fucked up. And oh yeah, the elderly get scammed the most out of like any other group. It’s fucking disgusting.

Maggie:
[1:05:59] Yeah, um with all that said buying a house is stressful, there’s a lot to know, but maybe it could be really great. I don’t regret buying my house. I will say it was hard, there were moments of stress, definitely very high stress. There were moments of anger, bad tenants, things breaking at really inconvenient times. Um, but ultimately I don’t regret it.

Taylor:
[1:06:25] Same. I, if there’s just like a sense of control that you have as a Type one person that I really appreciate um that you don’t have when you rent, you know, you just, I know not everything’s in your control, you have to pay your mortgage obviously as the bank’s gonna take your house away. But um having a sense of like ownership, it makes, it’s like a different level where you’re like this is mine. I must protect it.

Maggie:
[1:06:52] Yeah. And it can be really fun. Like can you make it your own is fun.

Taylor:
[1:06:55] It can be fun. Because you get to, you get to make all the decisions. Like obviously within reason, you can’t like put a water slide in your backyard. Unfortunately. You know, I would, I would love to, I wasn’t like roller coaster water slide, like, like a theme park water slide.

Maggie:
[1:07:05] I’m pretty sure you could do that. Okay, we don’t have an HOA. I’m pretty sure you do whatever I want.

Taylor:
[1:07:12] Maybe I could actually.

Jewels:
[1:07:15] As long as it’s within your setbacks, you’re probably fine.

Taylor:
[1:07:18] That would be fucking awesome. We should look into this later. We’ll sidebar. But yeah, it’s fucking great that you can like literally make all the decisions and you don’t have to fucking consult anyone about it. It’s a beautiful thing

Jewels:
[1:07:22] Yeah. So that’s actually an interesting question before we wrap up. Like what has changed? It’s been a long time since I was renting, but what’s changed for you Taylor in that transition? As far as like mentally, were you spending a lot of time thinking about your housing for the upcoming year when you were renting?

Taylor:
[1:07:40] Well, so I was renting, the last time I was renting was in LA before I moved back to Texas. And to me it was very um, I mean it was easy, it was hands off. I just like paid the same amount every month and that was it and like as long as you like but the thing too with LA is that renting standards are really like preferable for renters like we you as long as you’re paying your rent and you can pretty much stay there forever, like it’s very relaxed.

Jewels:
[1:08:21] Very heavy renters right.

Taylor:
[1:08:21] Yes. Yes exactly. Heavy renters rights. So it’s super easy to rent in LA. Probably intentionally like that. But so it really wasn’t bad but it was one of those things though where they could sell the building and like you know and be like you have 30 days to get out, you know or like we, we’re going to up your rent like that is something we were worried about was like rents, rents going up. But yeah it’s just like you know it just never felt like, there’s just no ownership. It’s just like okay where am I going to live next in a few years when I’m done with this place, like it just didn’t feel like home.

Maggie:
[1:08:54] Yeah, one of those, one of the things that I like about living in my own home versus renting is I lived down the street, like a couple of houses from where we are right now, and I really liked the house and there were so many things I was like, oh, like, oh you could just like change this one thing. Just like put better countertops or just work on the garden a little bit or like stuff like that. But I was like every time it came to that I was like, I’m not going to do that for some fucking homeowner I don’t even know. Like this guy just asked me for money all the time, I’ve never seen his real face, like I don’t want to improve his home for him. And so yeah, what’s the point? Like eventually I’m gonna move out and like this feels like a waste. And then when I got my own home, I was like, well this is for me and I didn’t make it what I want.

Taylor:
[1:09:36] Yeah, totally, I always have home projects that I’m working on, where I’m like trying to slowly upgrade things and make them nicer.

Maggie:
[1:09:41] Which is good and bad, like I kind of get annoyed with how many things I still need to do, but it is, I basically feel that I will work harder because it’s my own house, whereas when it’s someone else’s house, I’m like, I don’t like, this is broken, cool, I’ll call him and let him know.

Jewels:
[1:09:57] Right well, and you know, you get the benefit of those upgrades for the long term, whereas you’re not like, okay, I’m going to do this now, and if he doesn’t renew my lease next year, I put all that effort in for more money, you know, the effort and expense.

Maggie:
[1:10:00] I saw that house that I rented go through three homeowners and increase almost double in value in the time that I lived there, which is for only three years.

Becca:
[1:10:17] That is insane. I will say that another benefit, I mean of making sure you have a good relationship with your tenants is that like when you care about the people that you rent from, you like want to make the home really beautiful. Like it’s not just like I know I’m an exceptional situation because I’m living with like actual very close friends, not just like, a landlord I vibe with, but um in the past I I like have lived with like or had friends really who had landlords, they were just like good people. They weren’t their friends, they were just like, they would come by periodically just to make sure everything was okay and they like truly cared about them. And I have a friend who, you know, I have friends who are landlords and they’re like that and I don’t know, like you put so much more pride into your home that you’re renting when you care about the person who owns it, even a little bit like, even if you just don’t want them to come back and see a hole in the wall or whatever. Like, I don’t know, I think it makes it crazy big difference.

Taylor:
[1:11:17] Yeah because you feel like a sense of yeah ownership and pride over it, you like want it to be nice and you like want good people to live there.

Maggie:
[1:11:24] Well, like I had tenants who I wouldn’t call it my good friends, but I really liked them and I would like to think they liked me too and we were able to come to compromises together because we had that trust. Whereas with other tenants who didn’t treat me with respect or like me, I wouldn’t have cut those deals with them. Like my tenants were like can we move out a month early? We found this other place we really like and like they want to start their lease sooner and I was like, yes, of course. Like because I know you and I trust you and you’ve been great this whole time. But if it had been a tenant that was shitty to me the whole time I’d be like too bad, you have a lease, right? Like I don’t know, that relationship is important even if you’re not good friends.

Jewels:
[1:12:02] I think it’s super important. A lot of people who get sold on the dream of investing in real estate go into it totally and I like, I’m big on numbers and I love math, and so they go into it with just that like this is an investment and it’s a very sterile sort of treatment of the situation of forgetting that what they’re actually doing is running a business, even if it’s primarily passive depending on how you set it up. But if you are a like, business to client relationship and you’re providing housing for people.

Maggie:
[1:12:32] And your home is important.

Jewels:
[1:12:33] The asset’s important and providing that service to the client is important and having a good relationship with your customers. Really important even if they’re not like your closest friend. But like Maggie said, you can become, you know like pretty good friends or a nice working relationship in that way.

Taylor:
[1:12:48] Totally, and you want to make them feel safe and comfortable.

Jewels:
[1:12:50]Yeah. Being a property investor, especially in residential or single family type of property, it really is like a big interpersonal business.

Maggie:
[1:13:05] And I’ve definitely had bad experiences with the property management companies and not just I haven’t thought about it, like it seems so convenient to just have someone else deal with everything, right? But I as a renter have had such terrible experiences with property management companies.

Taylor:
[1:13:20] Assholes, they’re all assholes.

Maggie:
[1:13:22] I know. From that side of it, I’m so turned off by it that it makes me really shy away from it as a landlord because I’m like, I don’t want people to deal with that shit. It was horrible. Like some of the worst times of my life we’re dealing with really terrible property management companies.

Jewels:
[1:13:36] I totally agree. So listeners out there, there’s a big gap in the market for a badass female-owned property management company that actually treats both the owners and renters as human beings who deserve respect.

Taylor:
[1:13:52] Should we just all collectively get all the listeners that are interested in starting these businesses with us? Everyone get on board, get in the mix. Let’s do this.

Becca:
[1:14:00] Join the Hotty Body Property Management Shop.

Maggie:
[1:14:05] Hotty Body LLC is gonna have like 70 DBAs.

Becca:
[1:14:09] Yeah, one thing we haven’t talked about which is one thing we should talk about is the ethics of buying homes and that’s like, I mean we could talk literally for the rest of the night on that. But I think it’s worth considering if you’re thinking about investing in property. Like yes, you’re investing to make money, we understand that and for financial security, but you are touching people’s lives, and you get to decide if you’re going to do that ethically or not because the society will not hold you accountable, especially if you live in a really hot market. Like you could, a lot of people in a market as hot as Austin can very much be unethical owners of property. And oftentimes are.

Taylor:
[1:15:01] History of the world is pretty much unethically stealing property from other people.

Becca:
[1:15:06] Right.

Jewels:
[1:15:07] People suck, don’t be people.

Becca:
[1:15:09] Don’t be people. So I know one thing that I’ve talked about in the last couple of days I’ve been looking at this property is like the kind of landlord I hope to be, because yeah, that’s really important to me and like the kind of tenants I want to attract and that’s really important to me and there are certain areas of Austin where you can attract tenants that might have really high paying jobs and like work in tech or whatever or maybe you want a place where that attracts attracts families and that attracts people who are gonna be there for a while or is across from an elementary school and you know that a young family could walk their five year old to school and like you could just be a part of that, and you get to enable that and you get to control how much they’re paying. You know like I don’t know it’s, I’m romanticizing because I haven’t had to do the hard part yet but it does feel important to like be mindful of those things, especially in a place in a town as segregated as Austin where we just have a long and sordid history of how white people have handled property in this city. Um, so to like be mindful of those things and I don’t know like you hear all these success stories. I heard a quote unquote success story, (I’ve bitched about this to y’all so many times) I was listening to another local podcast about real estate and they were had this girl on who’s like this amazing early twenties girl who is a real estate investor and she lives in Los Angeles and buys homes in New Orleans and flips them and then raises the rent by crazy amounts and I’m just like nothing about that sounds good. That sounds awful.

Taylor:
[1:16:53] But in her mind it’s like totally fine. Yeah. Life hack.

Becca:
[1:16:59] Like yeah like what a cool life hack. You can buy homes that are like from extremely vulnerable people, flip them to where no one in that community can afford to live there. And then you get to make that money.

Taylor:
[1:17:08] It feels icky if you were if she was like living in the community and trying to like make the community better and like also like doing outreach and like like trying to find a way to not make it icky. I would understand that.

Maggie:
[1:17:10] It feels very, it feels a bit detached.

Taylor:
[1:17:22] But like it feels so icky to be living in like LA and trying to like take advantage of this vulnerable population.

Becca:
[1:17:22] Yeah, like take advantage. Yeah, and I mean there’s the cliche, there’s no ethical living under capitalism is a cliche for a reason. Like if you’re really boiling every down to ethics, then none of us would do anything ever. Um, but I think that you, if you have control at least a little bit over how you’re handling a situation and can make it more. If you can buy locally instead of across the country in a historically pulverized community, um maybe do that. Like, like maybe maybe like create your community, work within your community and if you are hiding behind the guise of making the community more beautiful, then make sure it’s yours and it’s not someone else’s.

Maggie:
[1:18:11] One thing that Loren was kind of bringing up when she was still here that I’ve been terrible about and have wanted to be better about is, is connecting with your neighbors. Um, that’s something I don’t really do very much. But today I was outside changing the tyre on my car and the neighbor across the street came out and was like, hey, I have a like super awesome jack that you just push a button and jacks up your car. Do you want me to go get it? I’ll help you with this. And I was literally finishing as he came out and said this. But I was like, if I ever get a flat tyre, getting your best bet, I’m knocking on your door. And it was like, man, I should have introduced myself to this guy like two years ago.

Taylor:
[1:18:45] Yeah, I think introducing yourself and your neighbors is one of the best things you can do. I have done that at every place I live. I make sure I know my neighbors. Because I learned this in New York when I was living there, and like when you’re living in crowded cities like all on top of each other, knowing who you’re living next to is like sometimes a matter of life and death. Honestly it sounds really dramatic but like it’s true. Like if you don’t know that the fucking guy that lives next door to you is a psycho. Like I didn’t live in the best areas of New York okay. Like everyone on the block like literally knew each other. It was like straight up, people knew who to avoid and who to like make friends with and like I got, like I had to make like alliances with people and like be friends with the right people that were going to protect me and shit and like tell me who to look out for. That’s like a whole other level of crazy. But like that’s literally, that’s when I learned it though, in my twenties living in New York City living in sketchy neighborhoods where I was like, oh fuck, you need to know who your neighbors are. Like this is actually really important. So I’ve always had that mentality since then.

Maggie:
[1:19:48] That all that comes back to what Becca is saying, is that community is important and like buying houses across the country, although it can be very beneficial. I’m not saying you shouldn’t and maybe it’s something that even I might look into one day but like at least find some connection. Like go and visit the fucking place.

Jewels:
[1:20:09] Well I think there’s a big difference between like diversifying across another real estate market. Sometimes you don’t want to be all tied in on one, especially if your local market is heavily dependent on like one industry that may be going away. Then you may want to have like your local investment and something somewhere else. But I think that’s very, that can be very different from like I live in this one fantasy land and I completely invest in this depressed neighborhood over here and take advantage of that situation even though I’m completely removed from it. And I think if you start listening to like real estate podcasts and stuff, you always hear this vanity metric of like “we have 60 doors”. It’s like they count the number of fucking doors they own like the number of units.

Maggie:
[1:20:49] Yeah, I don’t like that.

Taylor:
[1:20:51] Gross, that’s so gross.

Jewels:
[1:20:53] I hate this and I think it’s so short sighted because, I was ranting on this this week if you can’t tell but I’ve sort of come to the realization that it is a combination of like ego vanity and fear. Because the only reason you end up with 60 doors is because you don’t trust your investments enough to invest a significant amount of cash. So you go for the cheapest thing you can find so that if you make 10 investments or 60 investments and 10% of them fail, you’re still okay at the end of the day. Whereas if you just took the time to build the team and make good investments upfront, you don’t need 60 doors and you don’t need this vanity metric that is totally removed from the actual service you’re providing. It makes me want to throw up.

Taylor:
[1:21:42] It’s disgusting because yeah, you’re right, you’re 100% right. The more that you have your hands in different things, the less quality of a product you’re gonna be able able to provide, right? So then, like everything goes down, like relationship tenant, you know, landlord relationships, you have to hire a company to come in. The company is probably gonna be a piece of shit, like, you’re not going to be on top of things that are happening in the neighborhood or in the house. Like, it’s just, it’s going the quality of everyone’s life will go down because you I feel like you need to own 60 properties instead of really investing time, and energy into like, really good properties.

Jewels:
[1:22:17] And it’s another thing that keeps a lot of women and people out of real estate investment is because as soon as you start researching real estate investment, you fall into that that ethos where they’re like, you need to get all these doors and you need to find the cheapest place possible. It’s got a cash flow like this and aall of this stuff that’s like when you start adding doors on doors, on doors all of a sudden you have these scaling issues where you can’t manage it yourself. So then you have costs going out to that and it makes it so unapproachable for people. And it completely ignores the fact that if you have $500,000 that you’re going to invest in real estate over your career, you could invest that in one or two places or you can invest it in 20 or 30 places. But what your day to day looks like managing that is very different. And for me personally I would rather have one or two places for that amount of money and a lot less stress and just make sure that I make good investments up front.

Taylor:
[1:23:09] Yeah, I agree.

Jewels:
[1:23:10] And I think that’s so much more approachable to people.

Maggie:
[1:23:13] Yeah, I think the overall messages like financial independence is important. Everyone should work harder for it, especially women, but don’t lose the ethics and humanity behind it. Don’t blindly chase money without thinking about the consequences of the actions that you’re about to take.

Becca:
[1:23:31] So thanks for listening to Part 2 of our real estate discussion. If you liked what you heard, please go and like this podcast. Subscribe to it, comment on it, rate it on whatever it is you listen to your podcasts on and then just hop on over to Instagram @vaginancepodcast. I want you to like every picture you see, go ahead and comment on them. Uh and just see the resources we have. You don’t have to literally do that. That would be a real task. But do you see the stuff we put up, we put up some really fucking helpful real estate stuff in the last couple of weeks that I refer back to to comfort myself regularly. So take a look at those, print them out, put them on your wall and also go to our Twitter. What’s our Twitter handle?

Jewels:
[1:24:16] We don’t have a Twitter handle.

Taylor:
[1:24:19] Jewels has been posting. Is it just not your personal account? Oh, well if you follow Jewels’ personal account, you’ve been posting some amazing Vaginance stuff on there.

Jewels:
[1:24:29] Thank you. It’s my testbed for stuff that I package for Instagram.

Taylor:
[1:24:31] We’re getting a twitter soon.

Maggie:
[1:24:34] And Vaginance.com

Becca:
[1:24:39] Yeah go to the website vaginance.com is where you can leave your voice memos and I cannot tell you how much we love our voice memos. We really love listening to them. So please call and record it and it might even show up on a podcast.

Jewels:
[1:24:45] And send us a voice memo with any questions about real estate that have come up after listening to these. And also, if you have a real estate story or bought your first home, we want to hear about it. Tell us all the details. Tell us how stressful it was or if it was the smoothest process in the world for you.

Maggie:
[1:25:08] If you had a bad landlord or a bad tenant I want to know about it.

Taylor:
[1:25:12] Tell us your horror stories.

[1:25:17] Like the excitement of it, of you, like literally being in the middle of a meltdown while we’re recording is I’m sorry, selfishly I think it’s fucking awesome.

Becca:
[1:25:26] Good.