The Planning Impact and Different Types of Homeowners

Wallace Smith:
Part of what we do on the 1031 show is we really advise people on how to handle the planning impact of their property, of their real estate. Our firm is a financial planning firm. And so it’s frustrating when we work with folks and they own assets, but they don’t really know where they fit into the overall plan. And there should be, we like to say, whenever you buy an asset, you should have the exit in mind.

MJ:
Exactly.

Wallace Smith:
You should know what you’re expecting out of this property. And I’ve seen you do that with some of the folks you’ve worked with, saying that, “Gee, you’re buying this property well.” And gosh, when you buy a property, you look at it. You’re like, oh gosh, “We could do this. We could put this in here. And that to there. Move this wall. Put in this.” It’s just like, “Wait. Wait, stop. What are you planning on doing? What is the exit? Is this your forever home? In which case, put as much money into it as you want. Is this an investment? And then you might temper that a little bit more.”

MJ:
Right. And right now the prices are going up. And the equity, if you buy a home, you’ve already gained equity, if you’ve bought in the last year. And so it’s okay to put money in. But we’ve been here long enough. We’ve seen the ups and downs here in the Denver Metro area a couple of times. And one of those was in the late ’80s. And so, I’m always a little bit cautious as to how much I put into my homes or advising my clients. But if you are planning to be there, you do it for yourself. You don’t do it to make money on the home. And that’s the thing. A lot of people are like, well, I want to make a lot of money in this home. You buy a home to live in it, and you make it your own.

Wallace Smith:
Now, there’s also investors. So we’ll talk about that a little bit as well. But as far as the homeowner, that’s really the two types of clients. Do you work more with individual homeowners or more with investors or a good combination?

MJ:
I work mainly with homeowners, but I do have several investors. But they’re very savvy. And there needs to be good equity position if they’re going to buy the home. And right now, our inventory is low, and the buyer pool is high. So supply and demand is just such that investors can’t make enough money off of a home. But there are still opportunities out there. There are wholesale opportunities as well.