The Science of Flipping - Interest Rates Are Low, But Should You Buy?

Episode Date: February 17, 2021

Interest Rates Are Low, But Should You Buy?

What is up, everybody? What is up? Welcome back to the Science of Flipping podcast. I am your host, Justin Colby. And if you are now accustomed to hearing our guy, Mr. Devin Burr, here on this podcast and you're liking what he's delivering, I highly encourage you get over to the scienceofflipping.com. Go look up programs. He is now a new coach for the Science of Flipping family, teaching all things BRRRR. And if you don't know what BRRRR means, that means you haven't been listening to his podcast. It is buy, rehab, rent, refinance, and repeat. And it is a great way to build a massive amount of wealth. And by the way, the refinance, if you're listening to what he's saying, it's all about making sure you can get as close to every single dollar out as possible. And you own a rental free of any of your own money

in the rental. So again, so happy that Devin's a part of the science of flipping family. He is always going to be talking wholesaling, rehabbing, but also building wealth and how he has accumulated multi-millions in wealth by buying rentals while at the same time, wholesaling and rehabbing and flipping homes, creating an incredible income for himself. So couldn't be more excited about that. There's a lot of great things going over at the science of flipping. So just head over to the website. If you want to talk to him and his team, go to the science flipping.com look at programs and you will see Mr. Burr and just fill out a form. See if you want to chat with him and his team about how they can help you start to build incredible wealth. With that being

said, guys, welcome back to this episode. I am going for a public service announcement of sorts on this episode. I am doing a lot more reading in the financial literacy space. I myself tend to, I guess I diversify some of my own investments in a more of a creative manner, right? I guess I diversify some of my own investments in a more of a creative manner. Right. Like I use a whole life insurance policy as a way to invest so that I can actually, you know, utilize my money in a certain way that saves me not only just taxes, but also I actually can actually make money on my money. I get pretty creative. And so I'm going to continue in that trajectory for myself. But one thing I've been reading a lot about is this idea of home ownership. So here's my public service announcement to you guys. I just read an incredible article

from CNBC talking about how I believe they said 44% of millennials, which is I believe 18 to 34 years old are actually not disappointed, but have buyer's remorse on buying a home. And the reason being the number one reason being the article went on to say several different things you know i think there was four or five reasons why they actually have disappointment or buyer's remorse in buying a home but the number one reason being millennials are having buyer's remorse is because they are buying based around their ability to pay the mortgage, not taking into account any of the other costs that it has to own a home, meaning just simply maintenance.

Let's just use maintenance. Let's not talk about doing major repairs, literally maintenance, it is reported nationally, by the way, that it takes roughly one to 3% of your purchase price every year to maintain your home. So let's just do some very rough math here. Let's say you buy a $300,000 home. Now, in some areas, that could be a very nice home. In other areas, that's not much of a home, right? But let's just use that as the starting point. And you're doing it because the interest rates are so low, you feel obligated to buy a home. Oh my God, I can get under 3% interest rate. I can afford to buy a $300,000 home.

And let's just make this a little bit more realistic. Let's call it a $500,000 home. Because here in Arizona now, you know, getting something for 300 grand is almost impossible. You know, and obviously, there's extremes like San Francisco, New York and all the other places. But I think 500 is a pretty decent home these days. And again, people are stretching their monthly budget because they can afford it, quote unquote, because the interest rate is 2.8, whatever it may be. And my public service announcement is, if you are trying to buy a home because you can afford the, let's just say three or 5% down payment, and you can afford the monthly mortgage payment, you should not be buying a home, period. Done.

End of story. Stop it. Just stop. I promise you, I myself went through this. I bought my first home when I was 26, I believe. It was 100% financing, which is awesome. I could afford the mortgage, but it really was like I could afford the mortgage just about enough. I didn't have a whole lot of extra money to play with. And what I realized after obviously losing my home to foreclosure, duh, is I bought wrong. You know, the reality is this, again, not talking about repairs, it costs a lot of money every month to maintain your home. Again, if we're using a $500,000 home, just 1% of that home is five grand a year. Okay. Now I actually probably would guess is closer to that 3% a year to maintain your home. Okay. But let's just choose the middle number 2%. You're talking about $10,000 a year that you are

putting into your home that there's no tax write-off. There's no tax benefit. There's no benefit to you. The only benefit is you're maintaining a home that already exists. You're not adding value. You're not doing major repairs. By the way, all of these things will come. And now you're at a place where you, you know, can afford the home in bunny ears and quotes, but you can't really afford life anymore. You can't go do things because essentially most, if not all of your budget now is going into this home and it's eating up all your money and can't really afford it. Now, here's the next part. What happens when those big ticket items do hit? Let's say a roof. Let's say an air conditioning, maybe a pool, right?

Maybe you've got a nicer home with a pool. Well, what happens when you need to redo the pool? What happens when the pool pump goes out, right? If you're in Arizona, what happens when your AC shuts down and breaks? So this is a big public service announcement. If you're buying a home just because you can afford the mortgage and the down payment, stop right now, shut it down, keep renting, keep saving money. I'm going to do future episodes talking about my philosophy of homeownership anyways. And let me tell you right now, I'm not the biggest advocate of homeownership. Now there's some asterisks to

that for sure. There's asterisks, but most like the vast majority. And I can't tell the percentage because a lot of the reading I've been doing, there's different percents and it's all statistics and whatever, but like more than 80% of people are buying a home for the wrong reason, right? Because they have the, what I believe to be kind of an archaic belief system of you need to own a home that you're an adult. Now you have a family. Now you own your home. Well, I'm not a huge believer that your home is a full asset, not until roughly year five or seven, when essentially the costs and the interest and everything else kind of start to even out so that now you're actually kind of at an even place and potentially can call it an asset. So I'm going to do future episodes about that. Cause I'm, I'm not a firm believer

that your home, your primary residence is an asset. And if you believe, if you agree with me, I'd love to hear about it. By the way, if you are not yet following me on YouTube, go to justincolby.com forward slash, or I'm sorry, youtube.com forward slash Justin Colby, my Instagram, the Justin Colby, Facebook, the Justin Colby. I have tons of giveaways over at the science living.com. But I'd love to hear about it. I'd love to get in a debate with you. As I have a new tech talk account, actually. And I posted something about this. And it has gone, you know, 50 something, 59,000 people have viewed this and there are thousands of comments from individuals.

So even on TikTok, you can find me, Justin Colby, T-S-O-F. And so I would tell you this, if you are a millennial, save some money. It's okay to rent. And lastly, if you are gonna maybe buy something, shocker, I'm going to advise you to buy a rental property for yourself so you can create some income, which is really an asset and not a liability, and take that money and save that money for maybe a down payment on your

actual home so you're not coming out of pocket. Anyways, there's a lot to digest here. There's a lot to chew on. There's a lot to unpack. The reality is this. When such a high percentage of millennials have buyer's remorse because they're buying a home because they can afford the mortgage because they feel pressured to buy the home, they're doing it for the wrong reasons, period. And I really believe you need to be patient. There's a time and place for everything. If you can absolutely afford a home and your income is incredibly strong,

and this is a dream home for your wife and friends and your family, okay, I'll give up. I get it. You want to own your home. It's your dream home. You want this for your wife and your kids. I got you. But if you're doing it for the wrong reasons, which is just because you can afford the mortgage, don't buy a home. I hope this finds you guys well. I hope you guys are rocking and rolling. If you're interested in real estate investing at all, and you want me or Devin or any of Science of Flipping family to help you achieve what you want to do in real estate investing, go over to thescienceofflipping.com. There's free forms to fill out. We will jump on a call with you. See if we can move your needle. I hope you guys are well. I'll talk to you on the next episode. Peace.