[00:00:01] Speaker A: The Michael Hatfield Re Max team presents.
[00:00:04] Speaker B: Real estate and more Bay Area real estate is different than in all of America. And why? What's up with homebuyers? What's on sellers minds? How is the market and much, much more.
[00:00:17] Speaker A: Now here's your host, Michael Hatfield. Welcome back to the real estate and more. Show real estate yourself into retirement is our topic today with some great input from my good friend, frequent guest, and now retired person Pat Vitucci. Pat is best known for authorship of the book don't invest and forget and for counseling hopeful retirees with financial investments. A radio host himself, we've had a great time planned today talking about how real estate and how this financial vehicle may help you to gain wealth enough to retire. Welcome Patucci.
[00:00:56] Speaker C: Well, thanks, Michael. It's always a pleasure and it's lots of fun. So let's have a good time.
[00:01:05] Speaker A: Well, we normally do, don't we? We always cause trouble one way or another.
[00:01:09] Speaker C: Always, yes.
[00:01:10] Speaker A: Well, you know, I haven't ever asked you, but it came across my mind the other day. What inspired you into writing your book, don't invest and forget?
[00:01:20] Speaker C: Well, there's a message I wanted to convey because there's so much confusion and there's so much information. You know, we're in the information age, as we all know, and with the flick of a button, you can get many, many opinions about investments. Certainly a lot of them are good and some of them aren't that good, as you would probably imagine. So I wanted to convey my thoughts about how the average person who is very busy with careers and kids and I maybe looking after mom and dad and maybe even want to sneak in a game of golf now and then. So I wanted to convey a kind of a simple, easy to read, how to do it investment book, not sophisticated, pretty granular in nature. And I think it covers the basics. And while writing a book is always difficult and it takes a long time, a lot longer than you ever thought, ever think it would. But I think it satisfied my need to communicate some of the fundamental ideas about investing in this crazy, upside down world.
[00:02:32] Speaker A: Yeah. And share it with others, too.
I know you pretty well, and I can see where you like to share your thoughts and things that might help people, and that's a very good vehicle to do that. And I know you're pretty much retired, semi retired. I keep you busy, it seems like. Are you enjoying it as much as you thought that you would?
[00:02:54] Speaker C: Yeah, even more than I thought I would. I thought I would have a hard time adjusting because, as you know, when you're working, everything is fast paced. And you drive in the fast lane.
You even take the fast track lane because you have to get to an appointment. And now I find myself driving in the right hand lane, the slow lane, and cars are zooming past me. And so your tempo of life slows down nicely. It gives you more time to reflect and do some introspection on how you want to spend the next chapter of your life. And so far, a year and a half into it, it's been a nice adjustment.
[00:03:38] Speaker A: If a person is taking the position that I am getting ready to retire, it seems to me like the wealth that they can build, especially in the San Francisco Bay Area, in equity appreciation through their home is one of the best ways of doing it. It right now. What are your thoughts?
[00:03:56] Speaker C: You know, we've been blessed in California for the last 30 plus years of having rapid, significant growth in the value of our home. So we, most of us, have built up a lot of equity in the home. And so the question now is, what do you do with the equity? Do you, do you stay in the Bay Area where they have very high paying jobs and therefore home prices are commensurate with that?
Do you need to be in the Bay Area anymore because you're not working, you don't need to take an income check from XYZ company.
So do you downsize?
Do you right size? You move out of state, you move out of country, kind of. The world is your oyster. And if you built up equity, you could take the equity and maybe buy something smaller, maybe something bigger. Friends have clients might have moved to Texas and bought giant homes for, you know, $350,000. And so with excess leftover money becomes a source for income. So it's another pension, if you will, that adds to cash flow when you're retired. Cash flow is the complete focus.
When you're working, it's growth and diversification. And then you go from contributing to 401 ks iras to distributing from 401 ks iras. And so the potential equity in your home can be a wonderful source of supplemental income. And that could be your trip to Europe, could be a trip to Hawaii, it could be a number of things. But cash flow is king when you are retired. Sustainable cash flow. You don't want to run out of money. When you're 80 years old and you're going to live 20 more years, you'll find yourself working part time somewhere.
[00:05:59] Speaker A: Yes, yes. I was speaking with a very smart guy this morning, and his opinion was that he wanted to not go into rental investment properties. He says, I want to build in my own personal residence, and he's in a position to do that. And the reason that he cited is in California, we have rent control and some of the municipalities are now enacting, I would say, almost severe rent control that are biased towards helping tenants and disadvantaging landlords. We've seen that happen in Concord just recently, and under some cases, the landlord is having to pay hard earned funds at the rate of two times a monthly rent, plus another $2,000 of relocation fees to tenants. So a lot of landlords have lost or in people that are investment, you know, inclined with rental properties to say, you know what, I'm just going to take my real estate in my home, use that equity and work with that equity because I can control a lot more of the factors. Don't you think that that's kind of an important thing?
[00:07:10] Speaker C: Yeah, rent control is kind of anti capitalism. I mean, we've been a successful country because we are a capitalistic country now. There's winners and losers, that's for sure. But how many times have you heard somebody comes from another country with $10 in their pocket and 20 years later they're multi, multi millionaires?
Not too many countries can brag about motivating down to the individual level for you and I to work hard and fulfill a dream.
[00:07:51] Speaker D: Please remember to go to our new YouTube handle my real talk show. That's
[email protected].
[00:07:59] Speaker A: And touch that subscribe button.
[00:08:02] Speaker D: You can also find past aired shows at our handle my real talk show on YouTube.com dot.
[00:08:08] Speaker C: Rent control, in my view, is the opposite of a free, open market system. And frankly, if you find the cities that have initiated rent control, their organization and structure lends itself to red ink every year, are not good managers of those cities. And they have, there's almost an envy of people who are successful and therefore they need to get punished. You worked hard. You bought a rental. You bought two rentals, you bought three rentals.
You are the villain. You are the enemy. And so we're going to get even with you. We're going to initiate some governmental regulations. And you look at France and Italy and Spain, they've tried that for hundreds of years. And here we are, just, what, a 250 year old country. And we've got a standard of living not unlike most other countries because we've got a free open market system.
[00:09:19] Speaker A: You know, a new 2024 assembly bill, twelve, it says ab twelve prohibits landlords from charging more than a month's rent for security deposits. Landlords that only own only one or two properties with a total of no more than four units are exempted from it. But let's just say that you had an apartment building of six or eight and, you know, these people want to bring in their pets. Well, you can charge one month of security deposit and that's it. So doesn't make sense to me. And then what about areas with high income or not high income but high value homes such as, you know, San Diego, la Jolla? If you go to lease a home down there, then you are only in a position to have to pay one month of rent, and those could be very expensive homes. It disadvantages the landlord in cases like that. And I know California Apartment association is very vocal in opposition to that. But in my view, if you're going to retire, I think that one of your biggest little nest eggs is in the home that you live in.
[00:10:34] Speaker D: We're going to take a short break.
[00:10:36] Speaker A: We'll be right back.
[00:10:40] Speaker D: Michael, what traits should we look for in selecting an agent? Look for a deal maker with a positive attitude who will work tirelessly for you. An agent who is adept in multiple offer situations, drafting contracts, marketing and advertising. A client's home is familiar with multiple cultures, experienced in mortgage financing, inspections and escrow is a huge asset to his client. What can you do as a plus for clients? Your agent is your eyes and your ears, one who works behind the scenes on your behalf. A great attitude, working well with others and keeping clients priorities. Number one is a given for us. Call 925-32-2775 now to schedule an appointment or complimentary home analysis. For excellence in real estate, call the Michael Hatfield remax team at 925-32-2775 or go to michaelhatfieldhomes.com dot with low housing inventory and constantly changing mortgage rates, buying or selling home is challenging. Choose an I experienced team. Who cares? Here's Michael Hatfield in a quiet cul de sac near the quaint town of Clayton. Revel in the wonderfully tall ceilings and open and spacious elegance of this immaculate 3320 1 bedroom, three bath masterpiece, 22 Wordsworth Court in Concord boasts outdoor living at its best, with sparkling pool and newly built gazebo, plenty of room for an rv or a possible adu. Highly ranked schools in a warm sense of neighborhood here. Don't miss this dream home. Get help with buying or selling a home by calling the Michael Hatfield re Max team at 925-32-2775 that's 925-32-2775 or go to michaelhatfieldhomes.com dot that's michaelhatfieldhomes.com dot.
Now welcome back to our show.
[00:12:39] Speaker C: Well, for the most part that's true. I mean, 401K IrAs should be either first or second in terms of total value.
But you know, most of us bought our homes for a couple hundred thousand dollars 30 years ago and now they're worth a couple million. So it historically becomes a large part of somebody's net worth. And when you sit down and evaluate cash flow in retirement, you're going to get a Social Security check, you're probably not going to get a pension check. Those are pretty much dead, except if you're a government employee and then you're going to live off some four or 5% per year of your 401k. Maybe you've got some other investments, but the totality of all those needs to come up with a reasonable number to cover your monthly nut and maybe have a few bucks left over for a new car every 2nd, 3rd or fourth year, a vacation or two per year, maybe go out to dinner once or twice a week. I mean those are fundamental things and we know all those things got very expensive in the last several years especially.
So it's simply an arithmetic lesson of going through the math and saying, okay, let's put everything on the table and in one eight five by eleven sheet of paper you can generally deduce that, yeah, I'm in good shape. I can retire. I can afford to retire and a, stay in the house in California or B, I've got to move to XYZ and what's the leftover money to supplement that income? And it really, and then of course your legacy planning ties into that. How much do I want to leave to my kids?
Do I want to leave a million dollars to each of the kids or do I want the last check to bounce when I leave this?
[00:14:43] Speaker A: Yeah. What you're saying is something that's based upon a couple or a person that works that actually produces something in the way of income.
Some people don't want to work. They simply do not want to work. So if they don't want to work and they want to live off the generosity of somebody else, it makes it really tough for somebody else that owns that property, makes it really tough when people come in, how it used to be when people came in to see you to work up a plan. Did you have a checklist and how did you go about assessing where they were versus where they want to go? I know you've been on to me for selling cars for a while now, don't invest your money in cars. I think that's a chapter in your book.
[00:15:34] Speaker C: Yeah.
I've interviewed literally thousands of single people or individuals. Sometimes they bring their adult children in the room and we have a real kind of I call a come to Jesus meeting. We really get together and review their family structure, their legacy planning, and then we get down to numbers. Numbers are important, but all those other emotional things tie in.
You know, Papa wants to retire next week. Mama wants him to work five more years or vice versa. So you get into those marital things, you become kind of a quasi marital counsel, which, by the way, I'm not, not qualified. But you moderate this discussion because it's important that there's a connection between husband and wife in terms of their goals.
Mama may want to live in the mountains and Papa wants to live at the beach. Well, you can compromise those things and, you know, spend a little time in each. But fundamentally, there's got to be some, some real distinct agreement on what tomorrow's going to look like. And then you back into it with numbers. Okay, I want a new car every other year. Well, sorry, you can't afford a new car every other year. You can afford a car every five years. And guess what? You're not going to put a lot of miles on your car, so you don't need a new car that often. I know you're a car guy and you love cars, but that ain't happening. So let's throw the new car out the window right now because these other things are a higher priority. So you kind of prioritize spending and your wish list, you bring to the meeting your Christmas wish list, and then you distill it down to what's pragmatic, what's affordable, and you end up with a game plan that in most cases. I've had clients for 35 years and they're doing fantastically well. They've stuck to the plan. We've adjusted it over the years based on market conditions, based on family things going on, but it's always modifying the base plan without throwing the whole thing out.
[00:18:04] Speaker A: Wow. It must be a very exhausting process. Although I have sat before you in the past and you actually assessed the level of tolerance for risk, and I was off the scale. I think thats probably one of my difficulties. But you assess the level of risk and then develop a portfolio from there of which real estate obviously is part of it. And you've done such a great job of that over a number of years. Well, ladies and gentlemen, you've been listening to the real estate and more show. I am your host, Michael Hatfield, and we're talking today with our special guest, good friend, Pat fetucci. Thank you for listening. So when, when you're in retirement, you just try to manage what you have according to a game plan or a roadmap, is that not right?
[00:18:51] Speaker C: I, yeah, you're always reviewing the game plan, reviewing your portfolio design, tweaking it where you need to, but fundamentally, you're not making major changes. You're not taking outrageous risk. You're not buying timeshares or crypto.
That's at one end of the risk scale that you really want to stay away from. You naturally get a more conservative, you don't want to gamble the ranch and think, this is where I'm going to triple my money by next weekend. Rarely does that work out. I would almost say never works out. And there's a lot of Charlton's out there that will try and convince you that if you just put all your 401k in this plan, I can show you arithmetically, it's going to triple, you know, by next year. And that's, that's fiction. So you've got to be careful not to get taken for granted because, you know, there are a lot of, lot of bad people out there. Most of them are healthy, good, good spirited people. But the Internet is, is the wild west. And when it comes to, you know, real estate, talk about real estate scams. There's a lot of those. So your fundamental job is to evaluate real estate and how it fits in with the totality of their net worth. And then you're making recommendations. Yeah, we think you should sell your big house in Alamo and move to a condo in Alamo or in Texas or Portugal or Costa Rica. So you're in the sometimes unenviable position of giving them a reality check that they can't afford to live in this house or they shouldn't afford to live in this house. The pg and e bills, the tax bills, all those things are off the charts too high, and it's sucking up that cash flow every month. And that's the difference between going to Europe once a year or not going to Europe once a year. So it's always a trade off. I love my Alamo house. I love my Danville house. But I really want to go to Europe. Well, you pick.
What do you want to do? You want to go to Europe once a year? You want to go to Hawaii? You know, where do you want to, how do you want to spend the rest of your days or in lieu of surrounding yourself with those expensive two by fours in Danville?
[00:21:30] Speaker A: Absolutely. You know, at the same time we got it, we got to think that if we're going to have real estate, we take a look at a hard look at our cash flow to make sure we can support it in retirement or otherwise. And if we stay with that, we could stand to make a massive amount of wealth by appreciation in the home. Now, if it were somewhere like Texas, right now, Texas is somewhat peaked out as far as places in the United States as far as equity appreciation, whereas here in the Bay Area, it's still rolling. We're still super scarce on inventory.
Back in 2017, there were 2 million homes available for sale, and now you're talking less than a million. And that's in half in five year period of time. The scarcity is there, whether or not anyone else is talking about it other than me, but the scarcity is there. And if youve only got so many loaves of bread and youve got many people that want to buy that bread, that value is going to go up, creates massive amount of potential wealth for the homeowner. But it also creates some real tough times getting a first time home buyer into a home because the values just keep going up and up and up.
[00:22:52] Speaker C: Wouldnt you say, Michael, it's hard to talk to a young couple that they're buying their first home because the numbers are just downright scary, right? Yeah, but failure to jump in the water, you're never going to learn how to swim. And as absurd as these numbers are today, they're not going to historically improve tomorrow. Values aren't going to drop 50% percent, I don't think, unless we have some giant crisis. And even in zero eight, when we had the great recession, values did drop precipitously, but in short order they came bouncing back. So unless you've got magic and can time the market in some way that most of us can't, you got to jump in and take the beating. And the first couple years is tough when you own a home, but then it gets easier because your income goes up and then you start building equity and you're not giving away rent payments to a landlord who's enjoying all the depreciation and all the income, and you're on the sidelines. And so it's, I'm sure you see it every day. You're coaching young couples that are just scared. They're downright nervous about it, right?
[00:24:22] Speaker A: Yeah, and for good reason. The interesting thing that most people don't think about is the level of help from tax benefits.
If you're renting for $3,000 a month, you can take that and say, well, I'm going to pay this to a mortgage interest, and that's deductible. And then you have the depreciation on those two by fours that are, you know, it's a cash free deduction from your taxable income. And then when you go to sell it, you have the $500,000 tax credit versus your gain if you're married, 200 5250 thousand if you're single. I mean, there's benefits there to ownership. Plus you have a home that you can go to. Raise your children, raise your puppy, raise your wife, or let her raise you. All kinds of cool things to do. If you have a home that's steadily increasing in value, like we have here in the San Francisco Bay Area, it's just an amazing place to live. And don't get me wrong, because I get a little frustrated at times with some of the rent controls and this kind of thing. California is amazing.
It's just an amazing place to live. Weather wise, the Bay area is for home appreciation. It's amazing. Meet great people like yourself, do the math and determine what puts more money in your pocket. I think you're going to find that real estate, the personal residence, is going to be a big contributor to help a person retire in the future. What do you think?
[00:25:58] Speaker C: All those things I absolutely agree with. And there's a, there's a pride of ownership, you know, where we can say, this is my home, I own this.
So it's kind of been the american dream to own your own home. And while it especially difficult in the Bay Area, look, I have friends who have lived around the world. They've lived in Dubai, they've lived in London, Hong Kong. And their conclusion is nothing beats the Bay Area. And, you know, we've got culture, we've got sports, we've got entertainment, we've got great weather. We can go to the beach, we can go skiing. I mean, the variety of entertainment and stimulus is kind of the envy of the world. And guess what? That's why the prices are so high, because we've got a lifestyle that's pretty darn attractive, right?
[00:26:55] Speaker A: Yeah. And we have a scarcity of product, too.
I keep putting it out there. There was dramatically low number of homes on the marketing tour yesterday.
Generally speaking, there's 17 minimum to 35 or 40 homes where they come on the market. You take a tour of them and then you know about that home and you have it available for your clients if you have buyers. There was three in the morning in that particular marketing group. But, and I keep putting it out there, it's scarce, scarce, scarce. 2 million homes available for sale in the nation back in 2017. We're talking less than a million now. Homes available in the United States for sale. That's, that's inventory decreasing personified. So I don't know. Values have to go higher. People that own homes right now are going to make more money through equity appreciation and it's going to be tough for some first time homebuyers to get in in the San Francisco Bay Area. But that doesn't mean it can't happen. We won a one yesterday and there were eleven offers and we were able to win it without giving away a bunch of money for our worthy first time home buyers. So pretty proud of that, you know, so I know that you've used all of the facets of your book, don't invest and forget to make it happen. And for you, and it looks to me like you're doing very well being retired, even though I keep you busy and get you going to the gym upon occasion, whenever I can. So I'd like to say thank you, Pat, for being on the show once again, frequent guests that you are, and a smiley guy. And thanks for coming on, my friend.
[00:28:49] Speaker C: Hey, thanks, Michael. It's always a pleasure and a continued success. And congrats on that closing yesterday.
[00:28:58] Speaker A: Absolutely. Well, you've been listening to the real estate and more show and I'm your host, Michael Hatfield.
[00:29:06] Speaker D: Please remember to go to our new YouTube handle my real talk show. That's my Realtalk
[email protected].
[00:29:14] Speaker A: And touch that subscribe button.
[00:29:16] Speaker D: You can also find past aired shows at our handle my realtalkshow on YouTube.com dot.
[00:29:25] Speaker B: The views and opinions expressed are based on current economic and market conditions and are subject to change. Information on the show provided for illustrator purposes only and does nothing constitute professional or legal advice? Information from sources deemed reliable but accuracy and completeness not guaranteed. Michael Hatfield and the Michael Hatfield Remax team have no liability for information discussed on the show. Consult with qualified professionals prior to taking action.
