What Every First-Time Homebuyer MUST Know Before Buying feat. Manny Pozas

#7 Homebuyers don’t always get the support they need in preparing to buy a house. Today, we sit down with mortgage expert Manny Pozas, co-founder of The Mortgage Group, to discuss key considerations and common misconceptions for first-time homebuyers, including costs that are often overlooked or misunderstood such as private mortgage insurance (PMI) and homeowners associations (HOAs). Learn why homebuying isn't just about the down payment, but includes crucial elements like understanding the true costs beyond mortgage payments, navigating property taxes and insurance, and the three critical contingencies that protect homebuyers. Manny shares his personal story of confusion when buying his first condo (due to industry professionals failing to properly educate him) and how it inspired him to help others avoid the same mistakes. Now with 6 years in the lending industry, he uses his professional experience to break down complex concepts. We discuss the value of homeownership in establishing financial security and highlight how leveraging debt can speed up the process of building generational wealth. Every first-time homebuyer needs to listen to this comprehensive guide before making the biggest purchase of their life.

Connect with Manny:
Website - https://themortgagegroup.net
Instagram (for Manny) - https://www.instagram.com/mortgagesbymanny/
Instagram (for The Mortgage Group) - https://www.instagram.com/the.mortgage.group/

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Chapters

• 0:00 Introduction
• 3:40 Manny's Journey into the Mortgage Industry
• 8:50 Common Misconceptions in Home Buying
• 18:49 The Home Buying Process Exploratory Phase Explained
• 26:25 Making an Offer, Negotiation Tips, and Contingencies
• 34:22 Navigating the Loan Process and Locking In Interest Rate
• 38:26 Finalizing the Mortgage and Closing
• 41:38 Post-Closing Responsibilities and Financial Obligations
• 50:28 The Importance of Financial Preparedness
• 54:35 Success Stories and Real Estate Investing
• 59:31 Leveraging Debt for Growth and Generational Wealth
• 1:06:35 Financial Freedom for Manny

Transcript

Manny: 0:00

Things like HOAs, homeowner's insurance, sometimes flood insurance, even PMI. These are things that your typical first time home buyer aren't really knowledgeable about. the bank isn't gonna take into account the fact that mom and dad have to buy diapers, or mom and dad have to go to the daycare. The bank is only gonna look at what's on your credit report, right? The bank's only gonna look at what's on your pay stub. So sometimes first time home buyers have that post-purchase shock that comes a year in where they see, oh my God, when I bought this property, the taxes were like $3,000. And now looking at a $7,000 tax bill. This house has the pool, the backyard, quartz countertops and like it has the extra bedroom and the garage I want. But can you afford it? right? Personally, I've always been taught where debt is bad. You can't have debt,

Adam: 0:47

Hmm.

Manny: 0:47

But, a lot of the times it's about breaking out of that mindset and realizing that debt is not a bad thing and it's an instrument to potentially build generational wealth.

Adam: 0:58

some people are super content and actually just overjoyed by like, you know, I saw this guy like, we paid off our mortgage in seven years. And it's like, I don't care that it was 4% or whatever. Like I don't have to think about it. it's just a peace of mind. And now I can, I can work less'cause it's not something, it's not something that I'm indebted to anymore. So like, we're not insinuating, everyone should utilize a mortgage to leverage it into something else, but there's a lot of potential if you do utilize debt in a good way. If the numbers make sense, it can be remarkable from an investment standpoint, from a generational wealth standpoint All right. This is gonna be a fun one today. I'm interviewing Manny Pozas. He's got a bachelor's degree in finance and an MBA in international business. He was in banking for a few years and he's been in the lending industry for about six years now, uh, first as an underwriter, and then last year he actually got together with some amazing partners of, of his and founded The Mortgage Group. They're all mortgage loan originators and brokers who have helped thousands of people on their home ownership journey. I'm really excited to have Manny on today to share how his bad experience as a first-time home buyer inspired him to join the mortgage industry. And we'll also be talking about overall the home buying process, some common misconceptions that home buyers have about that process, and, uh, some advice he wishes most people knew about, and also how home ownership has been used, not only by him, but by lots of clients of his to establish financial security and something he's passionate about building generational wealth. So, really excited about this one. Let's get right into it. Welcome to the Financial Freedom Junkie Podcast, where we help everyday people master their money and fulfill their financial purpose. You should never lose sleep over money, but together we can change that. I'm Adam Fernandez. Join me and let's get addicted to the pursuit of financial freedom together. It's time to become a financial freedom junkie. Señor Manuel Manny, thank you so much for being on the Financial Freedom Junkie podcast, bro. I'm excited to, to share what, a lot of people need to be listening to and kind of some of your experiences here today. Thank you for being here. How's everything going?

Manny: 3:00

Good, man. I appreciate you having me. I think this is the, the cool part about what I do and kind of why I really got into what I do which is the education aspect of it. Because I feel like that's just what people want nowadays and that's what a lot of us wanted. We have that craving to like learn and be positioned well,

Adam: 3:22

Yeah.

Manny: 3:23

as we continue to age and as just as we become young adults. Right. Which is what we're at now. And I know we go, we go far back and it's, it's super cool. Full circle, kind of just being able to chat about some adult stuff now.

Adam: 3:37

Yeah,

Manny: 3:37

I'm excited. Thank you for having me.

Adam: 3:39

of course. So, I wanna talk about, I mean, you're a broker, you've been involved in this business for a number of years now, but I wanna start off with kind of hearing, I know part of the reason you got into the mortgage industry is I saw kind of on your side and having conversations with you, like your sort of like negative experiences or difficult times going through your own home buying journey. Why don't you tell me a little bit about that.

Manny: 4:07

Yeah. So I, I guess we'll, we'll, we'll take it even one more step back. I went to school for finance. Midway through my bachelor's I landed an internship with a Fortune 500 bank. Not to, not to name names, but I, I kind of did everything that you could kind of think of there. I, throughout that process, I was able to get licensed to as a, a mortgage loan officer. and I learned certain in intricacies, right? But what triggered that was right after my bachelor's, I had an opportunity to, to purchase a a condo. I. of close to where I was living and I was like, this seems like a great deal. The condo was listed at like and, and we had a family friend who was a realtor and, and, and she was like, listen, this is a great opportunity. You should hop on. And then I was kind of feeling on top of the world, just, Hey, fresh outta college, I have a, good slash decent from, from what I felt like job. And I definitely wanted a, a felt like I was invincible, so I was like, let's do it. Funny enough, since I was putting down substantial down payment I avoided having to go through an appraisal process on the property.

Adam: 5:20

Nice.

Manny: 5:21

So it, it was a kind of quick turnaround and from the, from day one all the way up to the closing date, I felt like I had so many unanswered questions and I had so many things that kind of just were, were left unsettled personally, which kind of triggered the, I guess I want to call it the nerd inside me, just to kind of go out there and like educate myself. I'm like, all right, this is at that time the biggest purchase or the base transaction I've ever done in my life.

Adam: 5:54

Of course.

Manny: 5:55

and, and I felt like everyone that was involved in that transaction was kind of just there pushing paper, unfortunately. It, it, it was not, not the best experience, albeit a, a great investment for me at the time. I, I still wanted to be able to have that ease to, Hey, listen, I did this. Why did I do this? How did I do this? And what were the processes and the in intricacies that, that go into that? Right. Shortly after the purchase less than a year comes around, I get a notice from the mortgage, mortgage servicer that I am that I need to replenish an escrow account. And I was, listen, it, were things that were, were alien like to me. And I had no one to really kind of guide me. And sometimes I feel like all it would've probably taken was a good 30 minutes to one hour conversation with someone that knew what I was going through and knew the intricacies of being a first time home buyer, right? And all that entails and, and kind of preemptively know, listen, as you go through this process, I've been there before. These are the questions you're gonna have. Right? Because a lot of the times I knew I had questions, I just didn't know what they were. Sometimes they, there's just so much going

Adam: 7:05

It is hard to like find the word sometimes. You're like, I, I'm not even sure the terminology to use, I'm just confused about this whole damn thing and I don't even know what the question is for this thing

Manny: 7:13

Yeah. Yeah. Well, 100%. And, and I would look at at the numbers in, in the, closing disclosures and even certain loan estimates throughout the process, and I'd be confused about certain line items there and. I'm typically like someone that's very involved in that. And people that I was dealing with at that time were just like, Hey, listen, it's good. Trust us. Go ahead, sign or whatever. Right. And again, like it, the things that on in the long run obviously have helped me, right. And, and has, has, have allowed me to, to put a little bit of wealth along the way, but still things that I feel like everyone, it should be keen on and should be educated on. So that kind of triggered a rabbit hole for me getting licensed. I, I worked with a few big loan companies in the us and, and then last year I kind of settled in and decided I wanted to open up my own practice with a couple of my partners. And we are rocking and rolling now. it's exciting, it's stressful,

Adam: 8:09

course.

Manny: 8:10

time it, it's honestly amazing times.

Adam: 8:12

That's amazing, dude. And, I always like, love to see people just stepping outta your comfort zone or like, oh, I'm gonna take a leap of faith and do this thing. And, and I think like having the exposure to it over the last, what, like about a decade In, in different facets. it's helped you set yourself up for success you're pretty fresh into it. So the growing pains are real, I'm sure. But I want to just take a quick step back and we're gonna kind of unravel this. I feel like I'd like to do that, but I'm thinking, taking a step back to your first home buying experience, like now that you know better, if you will, what were the things that were not clear to you? Or, what are some of like the, now you working literally with potential home buyers or actual home buyers like what are some of the most common misconceptions that maybe you had or that now you're seeing a lot of your clients have?

Manny: 9:03

Yeah, the one thing that I, and, and this is kind of general and you could into it as detailed as you want, but the. Just the costs that actually go into purchasing a home. And not only the, the upfront costs and what are involved and, it's not as common. but it is, sometimes you, you do see it that where people assume, Hey, listen, I'm gonna buy a house. I'm gonna come in with, with 5% down, and that's what I got in my bank and we're ready to rock and roll. Right. And so a lot of people don't know that. And, and I wasn't I, I don't want to use the word naive, but I wasn't, i, I didn't have that mindset. I knew there were added costs, I just didn't know what they were. Right. So there are a lot of things that go into buying a house. There are a lot of things that go through that transaction. And sometimes you're not gonna figure it out on your own And you need someone there to be able to guide you, when you're buying real estate in general, it's a team transaction. You have more than likely your realtor. You have more than likely your loan officer. And then you also have a title company that's kind of all there on your side, making sure that I. The transaction is in your favor to the best of their abilities, obviously. I think that, and as well, obviously just what goes into your monthly payments, so once you close on your mortgage, There are other things, that a lot of people aren't expecting, right? The principal and interest of a loan of the mortgage thing, right? Things like HOAs, homeowner's insurance, sometimes flood insurance, even PMI. These are things that your typical first time home buyer aren't really knowledgeable about. And, and I think that they should be, because again, for a lot of people a house is gonna be the biggest transaction they do in their lifetime,

Adam: 10:44

Yeah.

Manny: 10:45

and it is one thing to, like have a pre-approved amount from a bank, you go to a a loan officer and I tell you, Hey Adam, you're gonna be able to buy a half a million dollar home, man. And it's one thing to be able to, to have the ability, right, and to be approved for something like that. But individual themselves, you, yourself, you're the one that knows your finances better, right? Than, than the bank does. Because the bank isn't gonna take into account the fact that mom and dad have to buy diapers, or mom and dad have to go to the daycare. The bank is only gonna look at what's on your credit report, right? The bank's only gonna look at what's on your pay stub. So a lot of the times there's additional expenses in your life, right, that are unaccounted for from the kind of, like aspect of it from the bank, right? The lending

Adam: 11:31

Yeah.

Manny: 11:32

So, so I think that part of it is also very, very big and, and you need to know, a lot of people are, that are first time home buyers aren't expecting costs, like property taxes and, and any potential special assessments when they buy a condo or stuff like that. there's a lot of added costs on a monthly basis outside of the additional closing costs that one should expect that. I definitely think that a lot of first time home buyers need to be educated about, I've been pushing this a lot. I've tried to talk to a couple people on this, but it, I, I feel like this is knowledge that needs to be implemented early on. And when I say early on, I feel like there has to be some sort of high school course that starts, like I. Bringing in a little bit more financial acumen to our youth, Because it, it sometimes individuals like aren't in, in the best situation how they were raised and stuff like that. And, and nowadays we're kind of dependent on family kind of to, to be the ones to guide you on that aspect. But I do feel like there's to, to continue to progress as a society. I think education's the biggest thing. and again, like sometimes like people go to school, get a degree, end up working on something that's not based on that degree. But something like this, something like financial acumen and understanding the intricacies of purchasing a home, which is a lot of the times the American dream.

Adam: 12:52

you're right. I mean, people get so enamored by it and excited and don't get me wrong, it can be like one of the most amazing feelings to have that. Kind of luxury of being able to buy something, it's something that's yours and you're like, this is my home. but to your point, like, I'm thinking about like, you brought up closing costs. thing is it's not cut and dry. it's going to also depend on the lenders that you're using, right? Because that's how people, like people bid for business. If I were to go and do closing through the mortgage group, that can look a lot different from a cost perspective than if I'm gonna use some national bank or international bank or maybe a local credit union. Like all the fees that are going, into that, the cost structures of all that is gonna be different, right?

Manny: 13:34

Yeah, 100%. And, I'm glad you brought that up because I spent the majority of my I, I guess financial career on the quote unquote retail side of lending where I work for the actual lender. And the loan is. Underwritten and processed and funded through that. Bank, The, the, the one option that I had right now on the broker side of things we have the ability to essentially talk to someone and figure out what their needs are. And put them in the right product with the right bank, right? So the, we have access on the broker side to the biggest banks that you could think of, and then the smaller credit union type banks as well, So a lot of the times there's different situations that prompt different type of lenders, but at the same time, you're, you're spot on. Like everything not only varies from bank to bank, but it also varies by product. By product, right? So I'll, I'll give you a an example. I had a client this month actually that they wanted a little bit more cash flow on a month-to-month basis. This is, this was an investing client and they told me, honey, listen I'm, I'm, I'm comfortable waiving escrows. And what does that mean for people that don't know? What that means is, I'm comfortable not having to pay my taxes or not contributing to an escrow account to pay my taxes and my homeowner's insurance on a monthly basis. I am stable enough and I have the, I guess, financial acumen where I'm prepared for that one time of the year when I have to pay my property taxes or that one time of the year where I have to renew my homeowner's insurance. I'm gonna take care of it on my end and that's fine. What does this allow that person to do? It allows them to have a lot more cash

Adam: 15:24

Yeah.

Manny: 15:24

on a monthly basis. They're able to, to rent out that property and have a little bit more flexibility on a month to month basis. And sometimes as an investor that's king. Right. So with this individual we spoke, I understood that was a main point of emphasis, and we found a lender that was offering an absolutely amazing mortgage rate and. them to waive escrows with no penalty or no, no additional, I guess, points to be, to be paid at closing or anything like that, So that, that goes a long way because sometimes, like you, a lot of people think, listen, my, my checking account at Chase at Bank of America, Wells Fargo. I'm gonna go set up, set up an appointment, I'm gonna go get a mortgage.

Adam: 16:05

It is because it's like the convenient, like not even really having to do much thinking.

Manny: 16:10

Yeah. and a lot of the times it, it's a, it's a comfort thing and it's a, I've been with

Adam: 16:13

Mm-hmm.

Manny: 16:14

they're not gonna do me wrong. They, they already have my business and I'm, I'm, I'm comfortable going in them and, and, and having this, but at the same time, like, it, it's unfortunate, but at a lot of the times, it's not for your best interest. You get me. Because a lot of the times they're limited in their scope and there are unfortunately a lot of mouths to feed. There's the manager, the manager's manager, and then the, the vp, and then the, so there's a lot of additional. Costs that are kind of baked into your interest rates. So the beauty of being on the broker side of things is not only do we have the flexibility to put you in a product, and with the bank that fits your needs, but we're, we also have the ability to track pricing with all these institutions, right? So not only are are we, obviously, listen, Adam you're a W2 employee, you're, you're a first time home buyer, you have great credit. it sounds like you're, more than likely gonna benefit from using a conventional loan to buy this house. Now let's go out and see who has the best interest rates for conventional loans, right? So at that point, we're able to not only figure out, hey, listen, yes, is the product for you. It's what makes the most sense, but at the same time, we wanna make sure that you're getting the best interest rate in the market,

Adam: 17:33

Yeah, I guess I'm, wondering like. I think just to kind of wrap up this thought in my mind, Obviously there's for, for like people listening, there's a whole bunch of costs that go into buying a home. But it can vary widely depending on who you're using. And on top of that, something we didn't really talk about, it's just like the location. Of like the different markets that we're in. for example, I can go and I'm looking at a home on one side of town for a certain price. Let's say I'm looking at a $450,000 house in a certain part of town. I can go, you know, 20 minutes down the road to a different part of town. And the, the true price of that home can vary widely because of, maybe it's not just like an HOA component, but just like the different county versus county and city taxes or just all these different things. So it's not just, oh, what's the price that I can afford? And so it's important to be able to speak to someone like you who can have that sort of, that, that personalized service So, but, but what I'm wondering is, like, you talked a little bit about products and even me, like I've only ever had to deal with getting conventional loans myself. And the three purchases that my wife and I have done, it's always been the same thing. But there are these different options. is it reasonable to ask, like, sort of generically speaking, what is this home buying process gonna look like for, for someone to get like a teaser as to like, Hey, you know, I've been thinking I just got married or whatever, and I'm thinking about buying a home with my wife in the next two years and we're kind of starting to save up money. Like what can that look like?

Manny: 19:08

Yeah, 100%. And I'm glad you brought that up, because a lot of people have that same thought, right? They're just like, oh, I think I'm ready now. What? Right. So and I'll, and I'll kind of break it down into, into parts to the best of my ability. So I guess we'll start off with the exploratory stage, which is what you just mentioned, right? You're, you're in a situation now, whether you're living with family or you're renting, but you're at a point in time where you're. Trying to, to, to compile your thoughts and you feel like you're ready to purchase a home, right? So a lot of people's first instinct is, I'm gonna open up Zillow and I'm gonna start doom scrolling and like, liking some properties and like, oh my God, this one looks nice. Or, or whatever. But my mind doesn't work like that. And a lot of people need to have a kind of reset which I tell my clients this all the time, is, you need to one, first have your finances in order, right? Sit down with someone that is knowledgeable, that can help guide you, right? If you're not comfortable doing it yourself sit down with someone and then to kind of role play with the numbers and see what it is the financial picture's actually gonna look like, right? So step one on buying a home is getting pre-approved for a mortgage, right? And it doesn't necessarily have to mean that you have to fully submit an application or, or run your credit or anything like that. It's about simply having a a, a kind of simple conversation. Hey Adam. What do you do? Where do you work? How much do you make? How's your credit? Kind of getting ballpark figures there to kind of feel where you're at, right? And then if everything kind of looks okay, at, at that point, you could go into the actual mortgage application process where you kind of run through the numbers and actually get some kind of pretty like. I, I, I wouldn't say very accurate numbers, but for example, Adam, if you were to send me right now, Manny, I'm, I'm considering buying a property at, at 1 2 3 Main Street. Here's the property. I could give you a pretty close estimate breakdown on how much it's gonna cost you, right? Because now we actually have a property. So what I tell people all the time is, is. When you're going into it, it's fine that you've been looking on Zillow or, or Redfin or homes.com and you see a couple properties that you like, right? That, that's actually, I, I prefer like that because like that you have some examples to go off of, right? So during the preapproval process, it's very crucial that you have some real life that you could base yourself off of, right? So, Adam, you gave me 1, 2, 3 Main Street and I, and I tell you, Hey Adam, it's gonna cost you probably all in your cash are closed, is gonna be like 25,000 or whatever. And, and your monthly payment, here's, here's how the breakdown is gonna look right now that you have something a little bit more palpable in front of you, And now, now you can digest that. have to now sit down and. And do a personal review of your own finances, Because again, the, the bank is gonna see certain things. The bank really only cares about three things. And, and, and that's any assets that you have. Like what do you have kind of that's under your name that could potentially help you, whether it's just money sitting in a checking, savings, retirement account, or maybe any other properties that you have. Two, do you have any income? Are, are you reporting income? What type of job do you have? Are you a W2 employee? Are you a 10 99 employee? Are you self-employed? And then three is, how's your credit? So that's kind of the three prongs here, And when it comes down to your credit, you're gonna see liabilities that are tied to your social security number, But things like your phone bill, your electricity bill, things like that. Aren't taking into account from the bank's perspective. Right? So you might have some additional expenses that we're not taking into account of. So now, now that you have those initial numbers and, and you could digest 'em, you, you need to feel comfortable with that. And once you tell yourself, listen, the, these numbers are something that I could definitely work with and it's kind of what I was expecting. Let's move forward. So, so now you're kind of beyond the exploratory phase, you know, what you're getting yourself into. Right? You know, the added costs that come with potentially purchasing a home. Right now it's kind of the. unquote shopping phase, working with a realtor and you're kind of finding a property that meets the needs that you're looking for, right? Sometimes it's not gonna be all of them. Mm-hmm. I'm sure you know that. But at the same time, keeping the, the financial aspect into account. A lot of the times what I personally tell my clients, Hey, listen, before you go see a property, send me an email. Shoot me a text, send me the property address. Let's get you some numbers on it so you can feel comfortable when you're walking through that property. You know, Hey, listen, does this feel like home? Does this feel like a$2,500 monthly payment?

Adam: 23:49

Yeah.

Manny: 23:50

So I, I feel like that'll give you a little bit more confidence as you're walking through the property, right?

Adam: 23:54

also, sorry to cut you off, it's actually a very good point. Like it may be the only massive purchase you ever make, but at the same time, like you really need to feel comfortable with the people that you're working with because. It is a huge deal. the reason I bring up this idea of like having a team of people, even as a buyer, not just as like a business person that does investments, I'm talking just as a buyer is because sometimes, and I've been there, you go into a home and they're like, yeah, we have offer you. We're only accepting offers until 6:00 PM today Someone may get excited and someone's gonna say, yeah, we kind of sort of run the numbers. I haven't gotten all the details back from my broker, but I mean, I know ballpark. I'm sure we're gonna be fine. And you put an offer and, and your offer is accepted and maybe you feel obligated to see that through. And then when the numbers finally come back, which is gonna take a few weeks, it doesn't mean you can't back out, but there's a lot of emotions that come with that.

Manny: 24:53

You, you wanna feel comfortable throughout the process. So even before you got into under contract, which you're, you're bringing up great points. The other day I had a client tell me, Manny, I feel like you know me better than my family just because we're we're going into deep conversations about their finances and, and their expenses and their income. That sometimes you, you don't have these conversations with

Adam: 25:15

Yeah.

Manny: 25:15

So you're saying is super important, having a team around you, not only on the financing side, but as you mentioned on the real estate side as well. Right? Because, at, at the end of the day, you also have to understand real estate. Is a sales business as

Adam: 25:29

Mm-hmm.

Manny: 25:29

So there, obviously, people are always buying and people are always selling, right? So the people that are getting paid to do these things, they obviously want to incentivize you or have you making this purchase because it's gonna benefit them, right? They're also gonna get paid for this, right? So you also want someone that's on your side that's always looking out for your best interest, right? For example, a real estate agent should be very knowledgeable about what type of market we're in. Are we in a seller's market? Are we in a buyer's market? What type of leverage do you have? During COVID, it was a big, big seller's market, right? And people were making the sellers were getting 10, 15, 20 offers on a property, And you really had to come with your A game to get an offer accepted. Now in a lot of places around the country, it's, it's a buyer's market, right? Where a lot of properties are being listed and staying on the market for a while there we're seeing a lot of price cuts. So you'd be lucky sometimes if you're, if you're a seller right now, getting one offer right. Close to what you really want, So it's also about having that knowledge behind you, Because at the end of the day, it's a negotiation process, which I kind of, it perfectly brings us into this, the next phase, which is now you found a property, now you're gonna potentially make an offer on the property, right? So at, at this point you, know the property, right? Your real estate agent, and even your lender sometimes can help you out. Figure out what this property is really worth, understanding the market you're in and setting yourself up for success, But at the same time, trying to maximize you getting the best offer possible, right? So you're negotiating, you're having conversations, and you're making an offer on the property. And for this example, let's just say you're buying a half a million dollar home to make it easy on us, right? So you could go in there and you could structure it so many different ways, right? You could, Hey, listen, I know it's worth a half a million dollars, but I'm gonna offer you 4 75 and I want you to give me a $25 dollar credit. Why do people do that? Sometimes you do that because you could cut into your closing costs, right? You could keep a lot of cash on your pocket and kind of finance a little bit more, There there's a lot of cool, I wouldn't say tricks, but ways to structure real

Adam: 27:42

It is a strategy. Yeah.

Manny: 27:44

It, it basic strategy and that which is why you're, you're it's very crucial, like you said, to have a really good team around you, to guide you and to be out there in the trenches with you, When, when you're negotiating. So typically when a, a real estate contract has three major clauses, right? Three major contingencies that protect the buyer, Which is what we're talking about right now, buying. So typically when, let, let's say you make an offer on a property and it gets accepted. Right? Now you're triggering the, the, the, the contract itself, The contract has very specific dates that you need to, like you're kind of bounded by right these contingencies, So typically, let's say you make an offer on a property gets accepted. The first thing you typically do is you send some money into an escrow account. This account is, well, this deposit's usually called an earnest money deposit, where you're kind of showing the seller, Hey, listen, I have some skin in the game too, right? I know I'm buying a half a million dollar property from you. We know it's usually gonna take probably around a month to get this done. So just so you know that you're not wasting your time, I'm gonna put a five, $10,000 deposit into this earnest money account where it's being held there and kind of we go through this process. So you can see I have some skin in

Adam: 29:01

Right.

Manny: 29:01

So that's typically step one. After you you get your offer accepted. Step two is you and your realtor more than likely are gonna schedule an inspection on the property, right? At this point, this is. It has nothing to do with the re with the mortgage aspect of it. But you, your realtor, are gonna go out to the property with an inspector and the inspector's gonna check every nook and cranny of this property, Because it's, again, one of the biggest purchases of your life. You wanna make sure you uncover every rock to know if there are anything that's, that's happening to this property that you're not unaware of, just with, by looking at it with your eyes. So that inspection period usually happens typically within the first seven days of you being under contract. Let's say something, it is a big flag, right? And all of a sudden you notice, oh my God, it looks like the roof is in shambles and I'm, I'm probably gonna need like.$10,000 to repair this roof or something like that. You have the ability to renegotiate at that point, right? Because you're within the inspection contingency period, So at this point, you go back to the seller and you're like, Hey, listen, and when I say you, I typically mean your realtor. The realtors are negotiating back and forth where, Hey, listen, I know we were under contract for half a million, but this came up after our inspection we're either gonna renegotiate or I'm gonna pull out, right? Obviously you have the ability to pull out of the contract, right? What happens there? If you pull out of the contract, you get whatever escrow deposit that you made initially sent back to you, So the only real cost that you've spent so far is ordering an inspection, So you wasted a little bit of money. Inspecting a property,

Adam: 30:37

Right.

Manny: 30:37

that's kind of what it takes to, to, to buy some. Yeah. Yeah. And so at that point, let's say all goes well during the inspection, whether you renegotiate or you don't, let's say you move past that now the bank is gonna do their own due diligence, right? So you're typically buying a property, right? You have the inspector out there for your peace of mind. But now remember, the bank is the one taking the majority of the risk here most of the times, right? Since you're, you're typically, you're not coming in with 50% of the cash up front, So the bank wants to make sure that the property's in good standing, but they're also gonna do a little bit more due diligence on the backend. So they're gonna compare that property with recent sales and recent market activity to make sure that the price that you're buying it at makes sense for the bank and for you as well, So typically during the appraisal process, the appraiser's gonna check. Similar things that the inspector is, but they're also gonna give you a valuation of what they think the property is worth. So, in this example, you're buying a half a million dollar property. The appraiser is gonna give you a value, Hopefully the, the, the property is value that the half a million, sometimes they, the appraiser might come back and say, Hey, listen, you got a great deal. This property's actually worth 550,000.

Adam: 31:50

Yeah. And now the seller can't come back to you and be like, Hey, actually my property is, is worth this much.

Manny: 31:56

Exactly,

Adam: 31:57

Only the reverse is where you could be screwed. Right.

Manny: 31:59

Correct, correct. You, you make a great point at, at this point, everything that you've done so far, by the way, is confidential. It, it's all internal. Nothing is shared to the seller standpoint. Obviously, you bring them into the equation. If there is something that doesn't benefit you at that point, right, because they are bind to the contract. But in, in, in this case, let's say the appraisal came in a little bit short. You bought it for half a million, but it's really worth 450,000. The bank is gonna immediately say, listen, like we're gonna some risk in here, but we're gonna assume this asset is worth that 450 and not that 500. So we're only gonna cover you for financing the value of the property, which is four 50. Right? A lot of the times you're buying a property, you don't have the extra $50,000 in hand to cover that additional amount that it, it was short on. Right. So typically now you trigger another contingency. So you, this, this appraisal contingency, a contingency is typically around 21 days is the average that we see in our industry, where you have 21 days to have the appraiser go out there and give you their appraisal report and you could renegotiate if need me. Mind you, any, all of these contingencies are just a baseline in the contract. You could always extend them. And there's a lot of things, these are just kind of common

Adam: 33:19

Right.

Manny: 33:19

Right. But I'm just. Giving you the, the, the basic example here. so at that point, again, going back, the same thing that happened during the inspection period, you're gonna be able to renegotiate, right? Or you're gonna be able to pull out the deal with no harm, no file, right? At this point, again, it, let's say you decide to pull out now you spend a little more money on an inspection. You, you have paid for an appraisal, right? Because this is also something that you do have to pay

Adam: 33:42

Yeah. Now you might be down 1512.

Manny: 33:46

Yeah. At this point you, you have a little bit of skin in the game, right? But at the end of the day, like if it's a transaction where after the inspection, after the appraisal, now you're seeing some things that really doesn't make sense to you. It, it, it's better to, hey, take that one in the chin and move on to the next one at that point, right? Because ultimately these contingencies are set in place to, to save yourself from any issues that occurred during the, the loan process. Right? And again, the, these conversations need to be had and explained to someone before they even start shopping or making offers on a property. Because it's important information to know, right. What protections that you have, right? So if we continue down this example, let's say everything is, is looking good with the inspection. Everything is looking good with the appraisal, And you're kind of rocking and rolling on the backend. The bank is doing their due diligence now and fully underwriting you. As a borrower, and they're also underwriting the property, right? A lot of nuances go on here. Things like verification of employments. a additional credit supplements might be requested. You're gonna have conditions that come up during the loan process that sometimes might require, Hey, Adam, know you sent me over your IRA statement for quarter two, but we need the quarter three one now that it's populated, stuff like that come up during the loan process that will require you to potentially like give the bank more documents and more information as need be. Right. But that process typically is smooth saline because once you get to a point where you are pre-approved it's typically like a more than certain that you're not gonna have any issues. Usually any issues that arise during the underwriting process have to do with the property itself. Sometimes albeit there are some mortgage companies and loan officers that don't do their due diligence ahead of time and don't really ask the questions and gather the documents they need to before pre-approving, which is another topic within itself. But that's also what's being done on the back end of stuff with the bank. During this process as well. And, and, and I'll give you a little tidbit where this is more than anything something that I would be doing right is you're having conversations with your loan officer, right? And it sometimes it, it's, it's crucial depending on where you are in, in, I guess, where the economy is and, and, and are you in any like, crucial points in the economy? Especially now, with new political factors in play, right? The market shifts up and down on a daily, weekly basis sometimes, right?

Adam: 36:17

Yeah.

Manny: 36:18

the one thing you have to now take into consideration, the, the, the last major piece of the puzzle from the financing aspect of it is locking down your loan, right? So you're kind of talking with your loan officer and getting different examples and, and trying to time the market at this point to make sure that you are locking yourself in for the best interest rate possible. So at this

Adam: 36:41

Yeah. And I'm sorry, but, but locking yourself in, you're talking about. Because sometimes this can happen at the beginning or sometimes you're like, oh, you, you might be talking to your lender and they're like, well, we may be having Interest rates might be dropping. We feel like they're gonna be dropping in the next two weeks because of some Federal Reserve meeting that's coming up. Like, but you talking about locking an interest rate, because obviously the interest rate is for whatever that mortgage, maybe it's a conventional loan or an FHA loan, whatever the product is that you're getting. If you're taking out a mortgage, it's gonna be for a certain term. Right. And so you're, when you're talking about locking in, you're talking about locking in the interest rate, that basically your mortgage is gonna be based off of all the money that you're borrowing. Obviously it's not free. people need to make money if you're getting a mortgage, so you're talking about locking in the interest rate. That's gonna be for 15, 20, 30 years.

Manny: 37:31

Correct. No, no spot on. And thanks for adding that in into that. Yeah. You're, you're locking in your interest rate. Yeah. Typically for a 30 year mortgage at this point. And there's a lot of conversations to be had here, right? Because there are certain things that you can do to drive your interest rate down, There are certain things you can do to keep a little bit of money in your pocket, right? You could do things that like buy downs. You could do temporary buy downs. You could do just generally just buy down points on your mortgage to get a better interest rate, right? It varies. And, and I could have another three hour conversation just on this. For sake of time yeah. You're having this conversation and you're getting educated about the interest rate aspect of it and trying to time the market during the whole loan process, right? To, to, to see when's the best time to lock your rate in, because before you get that final clear to close, the bank is gonna want to have your interest rate locked in. Right? So let's say again, smooth sailing. appraisal is done. Now you, you get to the point where the final contingency is usually something that's called a financing contingency. This financing contingency is like, Hey, listen, if for one reason or the other, the bank says that they cannot approve you for the loan, you have one final out, right? Let's say the bank missed something, and all of a sudden, like they miscalculated your income and you really don't qualify for this property, they send you a letter saying, Hey, unfortunately, we're not able to approve you for this, for this mortgage. You submit this over to the, to the real estate professionals, and they're able to avoid the contract there. And again, you get the money back that you initially put in that escrow account. But for all sakes, let's say you make it all the way to the closing table, A couple days to a week before closing, you're gonna get something that's called a closing disclosure. That closing disclosure details everything to a t. Every single penny is accounted for where it's going, who's getting paid. Any movement of money you're gonna see there. What taxes, what's gonna happen with your escrow. Property taxes, transfer taxes, title fees. You're gonna get a very detailed breakdown of that. Typically the loan officer, as well as the title company, is gonna schedule some time to go over that and answer any questions you might have there, and kind of detail it to the point where you want it. Some people will tell you, Hey, listen, I, I get it. There's a lot of numbers here, Just kind of guide me, And a lot of people some other people like me, like want to be as detailed as possible. Hey, what does this mean? Right? What is, what is this stamp tax? Right? Like, what, what, what is this title charge here? So all that's happening as well, And from the, from the. Real estate perspective, you are now scheduling kind of a final walkthrough, So yeah, you went to the property, you want to go see it during the inspection, you haven't been back in a couple weeks. Now you wanna make sure that before you sign those final documents, you're walking the property and making sure nothing substantial has changed. Someone didn't go in there and ruin a whole bunch of stuff or that all of a sudden, like. Something went wrong, So you're doing something that's called a final walkthrough with your realtor, and you're going through the property, making sure everything's still is as you remember it, And then at that point, you're kind of scheduling your closing, The, the big day where you're going in doing some documents, the title company is, is middle Manning. The, the financial aspect of it, sending money where it needs to be sent to the sellers to the bank, and all that good stuff. Typically that morning or the day before, you're sending a wire or depositing a check to cover whatever is missing that for the transaction, Typically you put down an escrow deposit, but that doesn't mean that's all the money that's gonna go into your, your closing costs and your down payment. So you're gonna bridge that gap right at one point. And then, and then this is where it comes into account. How do you

Adam: 41:06

Mm-hmm.

Manny: 41:06

the contract, right? Because maybe you negotiate some seller credit, right? Maybe as part of that half a million dollar purchase, the sellers in the contract, they're also giving you $25,000 to cover closing costs, right? So all this gets essentially balanced out at the end, right? And you're gonna have a figure and, and it's gonna be to the, to the, the final decimal. And you're gonna be like, Hey do I really have to send those 12 cents as well? Like, yeah, you have to send those 12 cents So, so, so that's kind of where you're at now. And then, and then once you do that, you're kind of, kind of the keys and, and, and now you're, you're kind of ready to rock and roll. Usually when you close on a mortgage, that first full mortgage payment is included in that closing cost, in those closing costs. So your real first payment wouldn't be probably until like a month, month and a half that you've been already in that property. And then that now, now is the kind of the happy part. Now you're a homeowner, now you're moving in, like you're, you're doing all your, all your, your due diligences, but that's not where the process ends, right? Because now different things have to, are come in play that are something that's gonna be around for as long as you are a homeowner, So you've got the mortgage side of things taken care of, You're, you now, you're moving forward, you're gonna have to do a lot of things. Related to the property to make sure, and again, we're only talking about the financial aspect aspect of things here because obviously

Adam: 42:23

Sure.

Manny: 42:24

when you buy a house, there's a whole bunch of o other things that, that you do as well. But from the financial aspect of things, a couple notes that we need to keep an eye on, one is the property taxes, A lot of states and a lot of counties have some sort of homestead exception or item that could be tagged onto your property taxes that will alleviate. How the property property taxes are assessed and essentially how you pay a little bit less, So that's one thing. You gotta keep an eye out. Usually soon after you, you purchase your property and, and your real estate agent and or, or your loan officer can guide you. And even the title company can guide you on that aspect. Also homeowner's insurance. Homeowner's insurance typically is, is around for a year, right? So before the year expires you're gonna wanna do your own due diligence. Just like you shop around for for a new car insurance policy, you wanna shop around for a new homeowner's insurance policy and make sure you're getting the best deal on the market as well, and then the last thing is you always want to keep into account the financial instrument that you use to purchase a property, right? In your case, Adam, you've said you use conventional loans, right? So. You wanna know, always know, Hey, what interest rate did I close on this property on? To give you an example, let's say you close at a 5% interest rate, right? And you're always gonna want to keep an eye out on in the market because there are instances where you do something that's called a refinance, where happening to the property, it's still under your name, but all of a sudden there's a better situation out there. The economy has bettered something has triggered interest rates to be a little bit lower for whatever be. A couple years ago it was covid, A worldwide pandemic had interest rates on the floor, right? That's typically not gonna be the case, but no one ever knows. You always wanna be

Adam: 44:08

Yeah, every once in a while.

Manny: 44:10

Yeah. And, and knowing how everything ebbs and flows, right? So you could time it at this point because you've already secured the asset at the price point that you secured it at, But that doesn't mean that you could refinance the, the, the financial instrument and, and ultimately save yourself hundreds of dollars on a monthly basis, So those are kind of the three things that property taxes, homeowners insurance, and just keeping a general outlook and overview of the economic

Adam: 44:36

Yeah.

Manny: 44:37

and knowing what interest rate and what product you're in at right now, that from the financial aspect that you should keep into account moving forward as a property, as you continue to live through this

Adam: 44:48

and one thing I'll add to that, like in my experience properties that I've had, property taxes have either not changed at all. I. For many years or they've barely changed.'cause that's all based on like the tax assessment right. But homeowner's insurance, like, I had just had properties up for renewal. I'm pretty sure that my homeowner's insurance went up for one of the properties by 30% and I did shopping. being cognizant of these costs can change significantly from some month to another, or at least like from one year to another. And so it's like being comfortable that you're going into this thing, knowing that like. I'm not just meeting it this time around because years are gonna go by and your costs can increase significantly from when you first got it if, and yeah, hopefully they can be refinancing to lower rates, but

Manny: 45:34

It, it, it's not always the

Adam: 45:35

it's not.

Manny: 45:36

and, and, yeah. And a lot of the things, and, and I know you, you have listeners and, and viewers from all over the place, but it, obviously, it's gonna depend where you're at, right? So I love to hear your property tax situation. Unfortunately, in my neck of the woods, it's not like that. People are typically seeing big increases. Where we're

Adam: 45:53

Yeah.

Manny: 45:53

A lot of things. It's, it's because, you know, a property's getting reassessed if you purchase it. Let's say the, the previous owner had owned the property for several years, the same half a million dollar property. They, let's say they bought it at 200,000 and now you're buying it at 500,000, right? So now that property's gonna get reassessed at a different value, So sometimes first time home buyers have that post-purchase shock that comes a year in where they see, oh my God, when I bought this property, the taxes were like$3,000 and now looking at a$7,000 tax bill, That comes with the education standpoint of it, Where, hey, listen, someone should have informed you and let you know, listen, when you buy this property, it's gonna trigger reassessment by the county, whatever county you're in, That typically goes hand in hand with a higher tax bill, So little things like that. And then going back to the insurance act aspect like all of a sudden, if the area you live in gets hit by a natural disaster, I guarantee you the next year you're gonna feel it in your, in your homeowner's insurance one way

Adam: 46:52

Mm-hmm.

Manny: 46:52

So, so there's little things that go into that, right? That sometimes are out of our control, But you try to navigate it to the best of your abilities, right?

Adam: 47:01

No, for sure. And I, I feel like there's, there's so much that can be impacted with that, but and we could talk about it for probably hours, like you said, we're not going to,'cause it could be like a multi-layered conversation maybe in other, other

Manny: 47:14

Yeah.

Adam: 47:14

episodes to come or something.

Manny: 47:15

you, I gave you kind of a, a generalized breakdown of the process, right? Of, of from beginning exploratory phases to, to closing. And then another thing I wanted to add that I didn't mention before it, well, a couple things. One, the homeowner's insurance process. You typically are shopping for homeowner's insurance also. During the loan process and you're selecting one and making sure that you have the, the best coverage or the best price or somewhere in between as well. And then also one thing a lot of people are unaware of is that mortgage mortgages are securities, right? Think of you and me buying and selling stocks. Big corporations are buying and selling mortgages,

Adam: 47:53

mm-hmm.

Manny: 47:53

And their service rights, So a lot of people call me a couple months after closing a mortgage and they're like, Manny, my loan, and just got a letter saying, it just got bought out X, y, and Z company, I thought like we did the loan with this person. And listen, that's gonna happen whether you like it or not. Unfortunately, sometimes some people live through multiple different loan services that buy and sell your loan, Your monthly payment will not change

Adam: 48:17

Mm-hmm.

Manny: 48:18

that will stay the same. now it's just instead of paying x, y, Z company, you're paying, you're paying a, b, c

Adam: 48:23

Yeah.

Manny: 48:23

Because they told your servicing

Adam: 48:25

Yeah, they're gonna honor the same, they're gonna honor the terms of what you signed up for. But I actually, I'm glad that you brought that up because something I'm thinking about,'cause like my life is for many years in my, just like in my professional career has been in like the fraud profession. I feel like we're guaranteed that. After you close, if someone's listening to something, they maybe recently bought a house or they were gonna buy a house. Soon after you close and you move into the house, you're gonna be getting mail from random places that look like they're legitimate. they'll use all these different tricks. not even all these tricks in the book, they'll make up a whole new book of like different things that they could possibly tell you about, oh, there's something deficient on your mortgage, or there was some paperwork that was left out. If you ever get paperwork this is just my, my 2 cents.

Manny: 49:10

Great tip.

Adam: 49:11

before doing anything. Go ahead and contact your broker and be like, Hey, I got this paperwork. Like it could look like it's coming from your broker. Call them up. Call up that point of contact that you've had before because it could be legitimate. But there's all these bam attacks that people can get destroyed

Manny: 49:28

And and you're spot on. great point there. A lot of it, you're gonna get a lot of spam. Kind of similar to not that I, not that I get a lot of these, Adam, but kind of similar to when you get a speeding ticket, right? You're getting something was flagged internally, right? And now all of a sudden you're getting a lot of propaganda, a lot of spam mail. And, and so you gotta keep an eye out what's legitimate, what's not. Like you said, a lot of the times they fluff it up, they use similar names. And it kind of looks like it's real, but it's really not. It's just some sort of, Scheme to get you to spend money where you don't really need to. Right. So a lot of the times, yes. Just like you said, whether it's just taking a picture of your correspondence, sending it to your loan officer or someone in your team and just be like, Hey, is this legit? Do I have to worry about this or not? The majority of the times, remember, they're, typically gonna communicate to you via multiple avenues. Email as well as physical mail. Right. And, but yes, great point. A lot of it's gonna be fluff and, and you gotta make sure that you don't dig yourself into a hole when it's not necessary. Right.

Adam: 50:27

Yeah. that kind of reminds me of something I wanted to ask you about, you talked a lot about the whole process right now, but what's one thing that you wish a lot of people knew more about? Kind of securing a mortgage?

Manny: 50:38

That not an overnight success story. A lot of people. Have this motivation right from one day to the next, and they're like. I wanna buy, And they expect that by the end of the month, they're living in their new property that they found on

Zillow at 2: 50:54

00 AM or whatever. And that's typically not the case. The the home buying process is a long game. I. When especially for first time home buyers, and a lot of the times like you have to, feel comfortable with a lot of things before you actually start the, the, the actual shopping process and making offer process. So the, the one thing, which again you and me, it's different because we're numbers guys, right? So, we, like to, think from that perspective a lot of the times, But for your average Joe, sometimes having that difficult conversation about finances isn't something that you want to do, and you kind of see the glamor of owning your own property and, filling the American dream and raising your family somewhere that you could call your own,

Adam: 51:37

Now.

Manny: 51:37

You need to be firm and, understand your finances before, you even get into that, and sometimes that, that's what, limits you to not being an overnight. I'll kind of process, Sometimes it's like, Hey, that I'm informed, be better that I spend the next three, four months paying off some credit card debt. It might be better that I save up a little bit more and maybe I should renew my lease for another six months or a year, or, there's different conversations that need to be had, Sometimes you're not ready

Adam: 52:09

Mm-hmm.

Manny: 52:10

and props to the people that are, props to the people that have been preparing themselves and, are doing all the right things, right? But the majority of the times, that's not the case. The majority of the times it takes a little bit of work, and step one is always having that conversation and, being in a vulnerable place where you're willing and open to talk about your finances with someone, because I know that's not always easy to do, right? So I, think that's the misconception a lot of the times. and a lot of days with the technology and, social media nowadays, we set false pretenses where it's like, hey, like, it seems easy, right? Like you're going on Zillow and, and you look and it says. Hey, you could buy this house and, and your monthly payment's gonna be $2,000 or whatever. And, a lot of the times it's not that simple, And we live in a very capitalistic society where it's driven by that motivation to spend and swipe and, do all that stuff, But again, this is. more than likely gonna be the biggest transaction of your life. Sometimes it's the only big transaction in your life, Sometimes you're, you're lucky enough to, to grow your portfolio and, become a real estate investor and, have rental properties and stuff like that, But for a lot of people, it's, it, it might be, it might be a one-time thing, right? That this is your forever home, And, you feel like that. So you want feel comfortable with the numbers, right? You want to feel comfortable with your financial situation, right? A lot of the times you're, you wanna be in, a certain neighborhood at a certain price point. And man, this house has the pool, the backyard, the, quartz countertops and like it has the extra bedroom and the garage I want. But can you afford it? Right.

Adam: 53:43

Right

Manny: 53:44

are you gonna, are you gonna lose sleep at night? Is it gonna affect your, your overall life, And, and these are conversations that are difficult to have and I think is the most important thing when you're preparing yourself to buy a home.

Adam: 53:57

I think that's so valid. I'm completely in agreement with this whole, this capitalistic sort of economy and, and, and social media can be remarkably, dangerous. And some people I think a lot of people know this, but. One thing I've been talking to people about, a lot of people about lately is like, what you see on social media is you're seeing the highlight reel of people's lives and only what people choose to show you. So there's a whole lot that doesn't go, like I think about that, but that episode of it was HGTV or something, they're like, if these people can build a house in one hour, then come on. I mean, obviously it's not like that. I'm thinking about, you mentioned overnight success, so what success stories do you have? Like maybe something that pops up recently with like a client where it's like it was a huge win because for one reason or another, I'd love to hear like one of those stories.

Manny: 54:52

the success stories come from the clients that I've dealt with that are not only organized, But that they're also a little bit risk adverse. Especially depending on what phase of your life you're in, right? If you're young and you're healthy And you feel like, hey, listen this is the time to, grow my livelihood, And, to invest in my family, and to prep myself for, a good retirement, an early retirement, I think it's a combination of a lot of factors, Just recently I closed on a fifth property with a client that I started working with. think it's been a little bit less than three years now. And, this client started off with a little bit of money in their savings account, and they turn that into essentially a property portfolio, Where sometimes it's less about timing the market and ti compared to time in the

Adam: 55:44

Yeah.

Manny: 55:44

So a lot, a lot of people have a little bit of, withdrawals or reluctancy to, to do something because they're just like, but what if in a couple months or a year from now. the situation's a little bit better, right? But what's happening is you're losing out on potential equity, So again, this person not to get into to specific numbers or whatever, Say that they had $50,000 sitting in that savings account that they used to purchase their first property, they're at like, probably close to 10 x that now. On their assets. and value that they have on their portfolio. And it was because they decided to pull the trigger, right? And, now they're at a place where they have a couple properties that aren't necessarily cash flowing them insane amounts of money and allowing them to quit their, regular nine to five, But what's, what's something that is, is not really talked about enough is the wealth that you build with equity, And just sitting on an asset, And this is one of the assets that you wanna really take advantage of. And funny enough, the same client we've become friends now. When I first met them, they were a referral. Never met the person before. And now we've become kind of friends, And, and now I, I've seen them evolutionized to the point where now they're looking at. Tax strategies right now, they're leveraging not only these assets to their advantage in the long term and building equity, they're talking about things that. It, makes you really proud of knowing, like, Hey, listen, I met you at this point, very basic knowledge, Kind of client held you through your first transaction, and now they're buying a property and they're putting it under a trust and, they're getting life insurance and they're kind of leveraging everything and setting themselves up for the best financial picture possible. Considering the fact that like you, you're sitting on a bunch of equity, And, and how do you leverage that now and how do you continue to grow? I know a lot of people say, Hey, listen, once you make your first a hundred thousand, like, that's the difficult part. But after that, it, it, it becomes a little bit easier to compound. And it's kind of the same with real estate, Once you have good chunk of equity, Like the sky's the limit, right? And, some people unfortunately don't get to that point because they're kind of trigger sensitive and, they're kind of hesitant, Where listen, if, you go through your checklist, And if the numbers check out and, and this checks out, and that checks out what really is, that's holding you back, is it that you're concerned? Because what happens if a year from now I lose my job? Right? What happens if this or, or that, Well, you have to also understand that you're gonna have a lot of protections and, there's a lot of things that could go wrong, right? But what if things go right? So I think it's a combination of, luck intersecting with opportunity, right? And, and once you set yourself up in that equation and you're prepared, I feel like the sky's the limit,

Adam: 58:36

ever everyone has different, like, levels of risk aversion. I mean I'm a fan of using leverage, using debt as, as leverage for, you know, something. I think once you've already sort of met your basic needs and you're saying, okay, I wanna do more and multiply. More likely than not, you'll want to involve other people in the process. And I don't mean, I'm not talking about like crowdfunding necessarily, but my point is like, it's almost like checking yourself that like, oh, is this investment gonna make the right thing? Because yeah, you can pull the trigger and you kind of only consulted with yourself. And it's, it's good to get those different perspectives. Now, it doesn't mean you sit on things for forever because then like to your point, time in the market is much more important than timing the market. But again, it's all about like building that team, even if it's just another person or like having a friend that. Is happy to go on that journey with you and they're just as like, almost like committed to your success as you are to your own success. I mean, that's where amazing things happen. So that's a really cool story. I can't remember at one point you mentioned it, but it's something I was curious about. how home ownership plays a role in establishing this sort of level of financial security. is there more that you'd want to add in terms of like how home ownership real estate plays into that And it's just like you can be that one person that does something different than what you've experienced

Manny: 59:50

we're both proud Latinos, right? We come from Latin backgrounds where,

Adam: 59:54

you know?

Manny: 59:55

at least me, me personally, I've always been taught where debt is bad. You can't have debt,

Adam: 1:00:00

Hmm.

Manny: 1:00:00

But, a lot of the times it's about breaking out of that mindset and realizing that debt. is not a bad thing and it's an instrument to potentially build build generational wealth. And I was talking to a friend where it, it was just kind of an off offbeat conversation the other day, and he was telling me, Manny but like, why would I, why would I invest in a property and that property appreciates, let's say to 5% on a yearly basis, right? Where I could just put it in the s and p 500 or, find a nice little mutual fund and, and see myself getting a seven to 9% a year over year increase. Right. And I told them this. I'm like, listen, so kind of comparing apples to oranges here, right?

Adam: 1:00:45

Yep.

Manny: 1:00:47

Because let's say you have $50,000, right? And you invest that$50,000 into the s and p 500, congratulations. Great year for the economy that s and p 500 goes up. Let's say 8% year over year. Right now that 50 k, it's up 8%, right? But now let's say you're, you're using that 50 K a down payment for a house. Now, that house is gonna appreciate, right? Let's say on average it's gonna appreciate anywhere between three to 5%, What you're not taking into account and what the, what the regular person isn't taking into account is that, that three to 5% appreciation isn't. gonna be on that $50,000 that you put down, It's on the value of the asset. So you're appreciating an asset that yeah, you put down 50,000, but that asset when you bought it, was worth 500,000, when you're comparing a three to 5% increase on an asset of 500,000 compared to an an increase of 8% on a $50,000 investment, right? Obviously the gain on the bigger asset appreciation, albeit a little bit smaller, is gonna severely grow the appreciation that you're gonna see from that investment, So I, I think a lot of people don't really understand that from first glance, And that you're using debt to acquire an asset that. Is gonna continue to add value and grow, Whereas any other, I guess, investment, you're kind of capped into what you're getting into So you're letting the market play out and you're letting your money make you more money, but X fold, in my opinion.

Adam: 1:02:28

Especially like the cheaper the debt is, right? Like when you're talking about, let's say buying, and it doesn't have to be about buying a home like a specific house. Like people will do commercial real estate, for example, and, and it's just multiples. But like the cheaper debt is the lower the a PR or the lower the interest rate is like when you, when you lock that in. Now generally from a residential perspective, you're getting a 30 year mortgage or like, let's say it's 20 or 15 year mortgage, you're locked in for that time at least. And if you're at a higher rate, maybe you can refinance down the road, but like the cheaper and cheaper that debt is, theoretically the more and more it makes sense to use leverage on that debt rather than I.

Manny: 1:03:17

A

Adam: 1:03:17

Because, because that three to 5% you are only,

Manny: 1:03:19

had

Adam: 1:03:19

there's only one component.

Manny: 1:03:20

day that, and, and sorry to cut you off, I had a client the other

Adam: 1:03:23

Yeah.

Manny: 1:03:24

went into a little bit of money, right? They got a little bit of, of an inheritance after their grandparents passed away and they had refinanced during the covid years, and they had a, a than a 3% interest rate, right? And they're like, Manny, I was thinking maybe I just off the house, right? Pay off what I have left. Like I, I had to put it in perspective to them, and I, and I showed them like, guys, there's, I. I yield savings accounts that are offering you a 4.5% a PY, Why would you pay off a debt that, that you're getting charged less than 3% interest, right? Where that same money that you would've used to pay off that debt is going to, can make you more money than the interest you're getting charged, right? So. So, so, so yeah. it's little things like that where people are, are in that mindset. Whether it's their, family background or what they were taught when they were young or whatever, That we kind of have to help them snap out of it. Right. And, and understand that debt. Within itself, you're leveraging something that you really couldn't do elsewhere. And, and again, I know we talked about, and, and kind of going full circle to wrap this up is we talked about earlier that we live in a, in a capitalist society, Where obviously there are the cons out there, With what we see on social media and, and sales tactics nowadays. And like just continuously pushing the, society to buy and buy and swipe and swipe right. But at the same time, there are a lot of advantages being in the capitalist society that people in other countries and other nations aren't privy to, right. And don't have the access to. So, so I feel like that's super important. The fact that we have the ability to leverage debt is amazing, which is another, a reason why I tell everyone to always. keep your, credit score a as, as crispy clean as possible because you never know when a good opportunity's gonna rise. Right. And you're gonna have the ability to leverage your credit history and all the good things that you've been doing to essentially make money through debt, right. Leveraging debt. So that's kind of the last tidbit I wanted to add there for sure. That people do have to break out of that kind of mindset and, be so scared of debt, where in reality it's just, it's a, it's an instrument to set yourself for generational wealth.

Adam: 1:05:38

there's always gonna be good debt and bad debt, and what I will say is there's not like a blanket, this is good debt and this is bad debt I'm not insinuating, I don't think Manny's insinuating either, that like, everyone should always have a mortgage. Like no one should ever pay their mortgage off early.'cause it's purely a preference thing, some people are super content and actually just overjoyed by like, you know, I saw this guy like, we paid off our mortgage in seven years. And it's like, I don't have to wor like I don't care that it was 4% or whatever. Like I don't have to think about it.

Manny: 1:06:09

Yeah,

Adam: 1:06:09

It's, it's just a peace of mind. And now I can, I can work less'cause it's not something, it's not something that I'm indebted to anymore. So like, we're not insinuating, like, everyone should utilize a mortgage to leverage it into something else, but there's a lot of potential if you do utilize debt in a good way especially from like a, from an investment standpoint, from a generational wealth standpoint, if the numbers make sense, it can be remarkable. not necessarily related to anything that we spoke about today, but the one last question I have for you is. What does financial freedom mean to you? Because this is the Financial Freedom Junkie podcast and sort of something that's come in my mind is this perspective of it means different things to different people. So what does financial freedom mean to you at sort of maybe at this stage of your life?

Manny: 1:06:56

Yeah, I mean, question. And, and what a way to end it. I, and I do think this answer varies by the individual, right? But I in my opinion, the definition of financial freedom is being able to live the life that you want to live, And without having a fear where, Hey, if I lose my job, or if this doesn't go my way, am I still gonna be okay? And I think that's the real definition of, of being financially free, Being able to rest easy at night, Knowing, Hey, listen, I am prepared for a rainy day if it comes, right? at the same time, I know that I'm setting myself up for some sort of residual income where I. At one point, it's gonna be kind of self-sufficient where I'm able to just live my life and not have to worry about that and not really have to be living paycheck to paycheck. And I think that's the real definition, just being able to, live the lifestyle that you wanna live. Because a lot of people have different lifestyles and expectations, right? Some people very much homebodies and, and don't like to travel. And then some people are like, Hey, listen, I need 12 vacations a year, or whatever, right? about feeling comfortable in the lifestyle that you wanna live, And giving yourself that financial independence and freedom, right?

Adam: 1:08:19

Yeah, and I love that. I love that you talked about the whole not having to worry and that completely resonates with me you, you hit the nail on the head with that. So I'm sure it resonated with some other people out there. So, Manny, I just really appreciate you being here, bro. I think it's just an awesome conversation. there's a lot that I would've liked to, that we could've talked about, and maybe it'll be another conversation another day. you're in South Florida and it's kind of your, your market I guess. I think there might be people that are gonna want to connect with you after this, after hearing like the wealth of wisdom, but also that really cool perspective that you've had with your personal and professional experiences. So like, where would you like to point people to?

Manny: 1:08:54

Yeah. Well first of all Adam I wanna thank you for one having me on, and, and two the. The, the stuff you're doing with the Financial Freedom Junkie Pod is, is phenomenal. Like I, listened to every episode and I feel like the knowledge, the tidbits that you drop, are and not difficult to digest. So it, it's, it's definitely like an amazing starting point for someone that feels overwelmed with finance and with like, what should I be doing? What shouldn't I be doing? So I want to one congratulate you on that.

Adam: 1:09:31

Thank you.

Manny: 1:09:31

And two, I mean themortgagegroup.net is the website for our brokerage. Right there, you'll, you'll find information or social media profiles, So again, themortgagegroup.net, that's where you can find us and let him appreciate you having me on my brother.

Adam: 1:09:48

Alright man, take it easy. Thank you so much. And I'll make sure to include those links down in the description. And uh, I really appreciate the conversation. We'll, we'll be, I'm sure we'll be talking again not too long from now.

Manny: 1:09:56

Alright my friend. You take care of yourself.

Adam: 1:09:58

All right, well, I hope you all really enjoyed that conversation with Manny. If you wanna stay up to date with what he's up to, make sure to follow him on Instagram at mortgagesbymanny. So in case we didn't mention in the interview, The Mortgage Group is based in Miami. They're based outta South Florida, but they're looking to uh, expand into other states, so make sure to follow them. You can go into themortgagegroup.net to see what they're up to. And, uh, yeah, hopefully great things coming. See you all in the next one. If you want to stay up to date with what's going on here, make sure to follow the podcast, subscribe on wherever you're listening to, and, uh, we'll catch in the next one. Take it easy. Oh, and one more thing, quick disclaimer. This content is for general informational, educational, and entertainment purposes only, and it is not financial, tax, investment, or legal advice. See full disclaimer at financialfreedomjunkie.com/disclaimer.