The Legacy Wealth Code Podcast

From First Time Buyers to Investment Strategies: Real Estate Insights with Doug Schmitzer

• Michael Notbohm & Andrew Hoek • Episode 19

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Get set to unlock the world of real estate and mortgages in our enlightening conversation with the industry virtuoso, Doug Schmitzer. With his profound experience in the mortgage business and the property market, Doug unravels the enigma of the current market scenario, the escalating rates, and their influence on people's buying behaviors. Despite the high rates and market changes, Doug elaborates on how home buying remains a constant pursuit, offering a clear picture of the industry dynamics.

Are you a first-time homebuyer? Navigate the complexities of the current market with our astute guest. We delve into the challenges you might face, and dissect how supply and demand are influencing those planning to upscale. From FHA assumable loans to private money and hard money loans, we dissect various alternatives while shedding light on the intricacies of transforming a property from a flip to an Airbnb. 

In the final leg of our intriguing dialogue, we underline the significance of legacy and setting the right priorities. Doug shares his conviction on how a goal and legacy to strive for can impact financial success. He candidly talks about his outlook on having financial success without a strong bond with his family. We wrap up our conversation discussing the best advice for a college freshman, ensuring this episode is a treasure trove of insightful advice and motivation.

Onward!

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This is the Legacy Wealth Code podcast helping you build long-term wealth and elastic legacy through real estate investing, tax strategies and motivational stories from some of the most successful and influential people out there. Here are your hosts real estate investor and entrepreneur, MI Knottbaum, and real estate investor Andrew Hoek, attorney,

Michael Notbohm:

Hey guys, welcome back to another episode of the Legacy Wealth Code podcast. I'm Michael Notbohm, here with my partner and crime,.

Andrew Hoek:

Hey guys, good to be back. It's been a little while, but we're super excited about our guests today.

Michael Notbohm:

Doug Schmitzer is here, arguably one of the funnier guys I know. Got a large background in the mortgage business and real estate. Really, I think that's where you started. So just want to talk today about what's going on in the market, some of the uncertainty, private money that you're working with and kind of what your outlook is.

Andrew Hoek:

So welcome to the show, thanks for having me boys, absolutely glad that you could join us today, and so why don't you jump in and give us a little bit about your background, how you got started in real estate, how you made your way to Tampa and what you're doing now?

Doug Schmitzer:

Okay, so my background was at 21,. I graduated college with a real estate minor and started selling real estate Right. So I get into real estate. It was also bartending, wasn't? A lot of people back then letting 21 year olds sell their house Right? So got into real estate up there, really developed that business I had. At that point I had people's parents my friend's parents that were downsizing, friends buying, they were up selling. So it was a very good market, loved it, thought that's what I was going to do forever.

Doug Schmitzer:

Then I came down here one weekend, went out on my brother's boat who was living down here for like five years before me went out to Shell Island drinking beers in January in the water, having fun. Saturday go to Gasparilla, kind of like I'd mentioned when. Gasparilla was really Gasparilla, 750,000 people having a great time. Remember, I'm from Bucks County in Philadelphia where it's cold all winter and gray. So so then that Sunday, you know I go to the Super Bowl and basically my brother's like you should move down here, you should live here. I'm like I can't, I can't move from where I'm at Land and Philly, three day old, snow everywhere, dark, gloomy, cold. I'm like, yeah, packing my crap, yeah.

Andrew Hoek:

So that's when I that's when I moved down Back on that plane and head back.

Doug Schmitzer:

Yeah, so my girlfriend now my wife came with me and then basically, when I got down here, you know we talked about, you know we got married and started talking about starting a family. So that's when I got into mortgages so I could handle things.

Andrew Hoek:

Did you start with a brokerage down here? I did Straight in on real estate. No, okay, no, no, I can't you never did real estate in Florida, the sales, I mean the real estate sales.

Doug Schmitzer:

I had my license. I mean, I did do some sales for a while, but you know, basically when I had moved down, my brother had a company and he's like convinced me to move down here. So that's where I started and then, of course, gravitated back to my natural path. So, yeah, so I went and worked at a company for probably a year and a half, was actually working, was running their lending tree department, which was the old old bait and switch technique, you know. So I didn't like that. So I was like you know what? I'm gonna start my own company. So you know, brett Brett and I teamed up and started American Fidelity.

Andrew Hoek:

So that's great. So let's jump in and talk a little bit about, I mean, you. You've been through several market cycles now. You've seen a lot, obviously in the industry. You're in the rate world day to day. You're. I love when you and I talk, you always explain it as you're like it's a live market, like it doesn't matter what you think today or tomorrow. It's a live market. We're changing. So obviously you've seen a lot of changes in the last, you know, 12 months ish. Talk a little bit about how you think mortgages have changed, where you think rates are going in the foreseeable future and and somewhere around that.

Doug Schmitzer:

Well, you know, rates are at the highest they've been in what 20, 25 years you know. I think you've got a whole society of people who have bought and ready to sell and buy again, that have experienced rates in the threes and twos for the 15 years, you know, and they're like I'm just going to wait for rates to come back down to threes again. I mean a normal market. I'm going back when milk was a nickel right, when I bought my first place. Six and a half was a good rate. You know. It's just you know. And when this started happening, when rates started kicking up, I thought it would shut things down, because people usually get one when rates rates to go down right, but it pushed sales further because people like I have to get in was kind of abnormal.

Doug Schmitzer:

Usually it takes a while for them to adjust for that. Those rates to level up people like I need to get in before they go higher, so we had that push. And then after that, now when you're talking about rates, you know today, you know seven and a half, you know with 20% down and great credit score, if you're buying a million dollar home or whatever you're, it's a huge difference in qualifying power as well.

Michael Notbohm:

So, but yet somehow there's still people buying these houses. You know, like you, you haven't really, at least in Tampa, I'm sure, certain markets are going to have seen their experience different things, but this market. Maybe it takes a little bit longer to sell the house now, but people are still buying and I haven't seen a huge. You know you may see some price decreases, but it's not drastic it by any means.

Andrew Hoek:

So I was at an event last week and it was a panel of developers that do work throughout the state of Florida, and one of them made the comment we don't understand and we can't figure out the resiliency of Florida and he's like it doesn't make sense. I mean, there are some factors as to why it could make sense, obviously, but when you look at it on a larger macro scale, it doesn't make sense.

Michael Notbohm:

Well, when you land back in Philadelphia and you see the snow, it turns around and comes back to.

Doug Schmitzer:

Florida. There was an article the other day that said that basically the value of real estate in Florida is only second to California. Now We've surpassed New York, wow, so you know. That gets into another point where we were talking about how people maybe are waiting for rates to come down and buy. You know to purchase and we had mentioned before that. Hey, you know, when everybody gets off the sidelines and rates do come down, the prices are going to go up. You're going to have multiple bidding wars. People that with the cash are king, be right back to where you were.

Michael Notbohm:

You're going to be right back to where you were.

Doug Schmitzer:

So you might as well buy now if you can afford it, and then you have the real estate when that price goes up and refinance.

Michael Notbohm:

Well, yeah, what's the phrase?

Andrew Hoek:

Marry the home date the rate. Date the rate. I hate that phrase but it is accurate. I feel like. But man, I hate that phrase Sounds like it's a sales pitch right, but the basis of it's true, you know?

Doug Schmitzer:

Yeah, there was a. Do you guys? Do you see that show, linus? Yeah, I liked it OK.

Andrew Hoek:

What is it?

Doug Schmitzer:

So it's a show. This is Amazon or Netflix, I think the Paramount, oh, paramount, yeah, I think it is Paramount. It's like a CIA type Navy SEAL situation. But Nicole Kidman has a husband in that show that kind of sits in the dark and watches markets. He had a great quote in that. I don't know if you remember this, but he said he said I get greedy when people get nervous. I get nervous when people get greedy, yeah, so there's always an opportunity to you know. Capitalize on these challenging markets.

Andrew Hoek:

That's the one thing I go back to, that, that same thought where, when we talk about and I hear that all the time while everybody's waiting on the sidelines, everybody's going to jump in when something happens. Well, I think the reality, though, is when that catalyst event actually happens. Whatever is going to trigger that, I think, is going to be a large enough event that's going to scare people where, like, they might just say, well, we're going to wait for prices.

Andrew Hoek:

We're going to hold on now, you know, and it's like that's when I think you really do need to double down and we're going all in on something.

Michael Notbohm:

Well, I was in a networking group for a number of years and it was like in the beginning, you know, you're trying to kind of get your foot in the door with everybody in the group and well, you know, the market's been really hot for a while, so I'm just going to hold off and wait till it comes back down. And now it's like, well, now the market, now the interest rates are too high. So it's like what it? When are you going to jump in? Yeah, you know what are you waiting for? Because you're going to. They're going to like, now, all those people that could have bought and got it in the threes interest rate wise, now you miss the boat. So now the prices of the same as they were, maybe even marginally higher, but now your rate is seven and a half percent.

Doug Schmitzer:

That's another sales pitch or whatever your realtor used to be. You know the best time to buy, when you need to buy, right. So if you can afford it and you can get in because you're going to get the appreciation, yeah Right. The people that are kind of screwed in this whole market are people that are first time home buyers coming in, right. I mean, we had that hometown hero product that they open up to everybody because the funds weren't being used. Yeah, and the funds were gone. Right, it was an amazing product Zero percent second loans.

Doug Schmitzer:

People are getting the houses for a couple grand and it really helped the first time home buyer. But that also based off of median income, which doesn't apply as much to this area. Yeah, you know, that applies, maybe out towards the disaster, is that for you know, a little bit further out, although Lakeland is popping up now, sure, but you know, basically, the people that don't have something, that are just entering the market, it's tough for them. They don't have the fake money, the fake money, the appreciation to put down on the equity to put down.

Andrew Hoek:

I was having a conversation the other day. It was, you know. There's sort of this mindset now of do you get stuck in your first home too, because you can't? Yeah, you know you can't move and you're almost priced out of the larger scale up. So that's that's.

Doug Schmitzer:

That's a supply and demand problem right now. Right, am I going to move out of my house? I have three, three and a half percent.

Andrew Hoek:

Right.

Doug Schmitzer:

And go overpay for another property and get seven and a half. Yeah, you know it's just. You know it's funny. I thought you'd see more of the it's just. I guess with the equity position, you know FHA loans are assumable. Yeah, so there's a lot of FHA loans out there on properties that are assumable in the threes. You just have to have the money to put down for the difference of the equity that was.

Andrew Hoek:

So I don't know a ton about the assumable loans other than the fact that obviously you can step in as like the replacement borrower for lack of a better term and in. The only ones I've actually seen in in my day to day are on the commercial side. But I did one not long ago and it didn't make any sense to me because they did an assumption but they read just the rate.

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Oh, I didn't see that.

Andrew Hoek:

How? How does that even work?

Doug Schmitzer:

You know, maybe there's an adjustment of rate for the assumption.

Andrew Hoek:

Yeah, which I mean. Something enabled them to be able to do that, but in most minors in, yeah, and in my understanding most, most residential assumptions, you're getting the same rate. It's not. They can't change that term.

Doug Schmitzer:

I don't, it's not like I do those on a regular basis, you know I just know that they're assumable Right, and it could be a little sweet spot if people had the money down, because you remember what five, six years ago you know MI, you know PMI for FHA wasn't wasn't on every loan. You know, if you have that 78 percent, you know LTV on that property, the MI goes away, sure PMI on FHA. So you know those loans might be a pretty good selling point for some people if they have them. You know, yeah, because it became permanent for the mortgage insurance after that. Right. No matter what LTV.

Michael Notbohm:

Well, the thing that we talk you know a lot on this podcast is all related to real estate investing, right? So you know what we've been discussing is typical residential mortgages for your maybe your primary residence. But when you think about, you know as much as interest rates have gone up. You do quite a bit of private. You know, you've got your private money context. There was rates, you know. Yes, they were always 12 percent, 10 to 12 percent. They haven't really gone up.

Doug Schmitzer:

It's crazy, right. Right, so like just primes, eight and a half and and hard money is still 12 hard money's coming down from what I've seen, because so many people took their money out of the market, the stock market, and they're basically you know. I've always said you know, with hard money it's a great thing to do because you have an asset backing right your investment.

Michael Notbohm:

Especially if you're, if you're careful enough to underwrite the deal, so you've got a huge barrier of protection. You know, like a good buddy of ours has his own hard money company and their average LTV is like 56 percent. Yeah, and so he. You know, we actually had him on the podcast. He said the most profitable deals we ever have are the ones we have to foreclose on and we literally tell the people just sell it yourself. You know we don't want to take this equity sell and pay my loan.

Michael Notbohm:

Yeah, but those, those rates are still like. His rates are the exact same today as they were when the rates were in the threes, you know for primary residents.

Doug Schmitzer:

Yeah, I've seen them actually come down because the markets flooded with more investors. I mean we loan out our own money. You know, my friends, you know we've loaned up. Now, if you're going to go institutionalize, you let them underwrite it. But you're right.

Michael Notbohm:

But then you're going through the underwriting as if it's a regular loan.

Doug Schmitzer:

Yeah, they all advertise the same, you know Easy. Right, you know like when we do it, we look at it. I'll go out and touch it, see what the value is, look at the comps, you know, and then basically do the deal. I mean you do the paperwork for him. We just did a.

Michael Notbohm:

DSCR loan that literally we were like pulling our hair out. You know we finished a flip. We're keeping it as an Airbnb, so transition, I mean it was so stupid. What was, I don't know. They're pretty easy.

Andrew Hoek:

You would think this was a nightmare. It felt like a. It felt like a conventional loan, I mean like a consumer.

Doug Schmitzer:

Is it because you're doing short term rentals?

Andrew Hoek:

with it. I think there was a combination of stuff that that was on this one, but it was, it was long, it was cumbersome. I mean, even even yesterday I was dealing with it because they said, well, the the wire that you paid for the cat, we had to bring cash in on it, okay. And they said, the wire that you wired out is not the account.

Doug Schmitzer:

They used to verify reserves.

Andrew Hoek:

And I was like it's, it's still my account, it's just a different bank. Believe it or not, I have more than one bank account.

Doug Schmitzer:

Yeah, they probably like oh, that's what they are in a writing, like convention.

Andrew Hoek:

They're like hey, you could put a mattress money, but if you got, if you got

Michael Notbohm:

their flyer.

Doug Schmitzer:

you already verified it, so like even on conventionally UWM stuff. They don't care. Yeah, you already verified, you have the money. You can send it from where?

Andrew Hoek:

it was. I was like this is crazy for what's supposed to be.

Michael Notbohm:

Yeah, the flyer Closed in 48 hours. You know, easiest process of all time, but they got you in. That's what happens with those right.

Doug Schmitzer:

You did close with them, so they're like, yeah, so they they get you in the door. But we've been doing a lot of DSCO debt service, credit ratio products and I gotta tell you I mean you're gonna pay a couple points which you're gonna pay anyway for hard money and everything else. The last one I did was below eight.

Doug Schmitzer:

Yeah, so that's I mean you go conventional and then you went through your tax returns. You have other investment properties. They want all that information and everything else. You're gonna be at eight and eight point three, seven, five, paying a point anyway. I mean, that's why they're so popular.

Michael Notbohm:

Right.

Andrew Hoek:

So go back to your comment. A second about rates coming down, because we were coming off of a mastermind this week that had a number of that's unfair Of private lenders at it.

Michael Notbohm:

We got to meet Hulk Hogan. Side note yeah.

Andrew Hoek:

Well, you did. I missed that part.

Michael Notbohm:

Oh yeah, are you better for that? Yeah, I feel like a better person.

Andrew Hoek:

But one of the questions posed to the crowd was is anybody increasing rates to account for the fact that you know that bank money has gone up? And the resounding answer was yes. So most people were. They weren't going up an alarming amount, but they were going up, you know, a percent, percent and a half that type of thing on their private money. So I'm curious. You're saying you're seeing the opposite.

Doug Schmitzer:

I'm just go back to the same thing. There's a contact that has approached me that I have not dealt with before.

Michael Notbohm:

Yeah, but they're going at nine, wow, and they'll do a 30 year fixed and you're just crazy Because your prime is eight and a half, right, yeah, I mean, why would?

Doug Schmitzer:

Because they just they want the investment. That's a 60LTV right, so you're pretty secure in that it has to be in an LLC. But you know you're basically getting 9% on your money.

Michael Notbohm:

Yeah.

Doug Schmitzer:

So I don't know. I mean you get average 6 to 8% in the stock market. This is backed up by an asset and he wants deals, he wants volumes, so he's going to undercut the you know the rate from other people. Yeah, and that's on the other side of the state but the fund.

Andrew Hoek:

What are they charging in origination?

Doug Schmitzer:

One.

Andrew Hoek:

One. Oh, that's pretty solid.

Doug Schmitzer:

So I got to charge on top of that.

Andrew Hoek:

Yeah, well, duh it's not a hobby.

Michael Notbohm:

I mean, I'm not sure you're going to fund this life you've got which you can talk about later. But yeah, I mean the Super Bowl Gasparola that's just where it started.

Doug Schmitzer:

That was 20 years ago, I know.

Andrew Hoek:

That's probably the most epic weekend I've ever heard. Oh, I got others.

Doug Schmitzer:

Those are the ones I told you about.

Andrew Hoek:

So you know, we chatted real briefly before we started the podcast but, like, what's your take on, kind of, and I think some of this parlays into your comment about people staying in their homes, right, so which makes sense. I mean, you put me into a 275 and I had a call with my financial planner the other day and he looked at that and he was like I don't ever want to hear that you're making an additional principal payment on that loan.

Doug Schmitzer:

And he was like never pay that thing off, Put your money somewhere else.

Andrew Hoek:

And I'd say it was funny to hear that now. But you know, the point is is we're seeing some of these products come out that are like now third mortgages, as you know, hitting the markets. Or what I'm seeing is home equity agreements that are kind of parlay like a home equity line, but if you don't necessarily qualify on the line and they're giving you a chunk of money for exchange of some ownership in the property which is its own animal and its own beast, but you know, if somebody's locked in their home, and now you've got to create these avenues of tapping into that equity, what's your overall take on that? I mean, that sounds some alarms off in my head, but I'm also tend to be a little conservative, especially on your primary residence with that type of stuff. But what do you think about all that? In the grand scheme of things, a big picture.

Doug Schmitzer:

Well, I think that our prices are here to stay, you know so. Tapping into that equity is not like back in 08 through 2010,. You know where you had the negative am loans and financial crisis and everything else, and the values dropped. I mean, you just saw that we're value real estate. It's an article. You know, I've read it and you know the validity has to be there. I would think so. I mean tapping into the equity of your property.

Doug Schmitzer:

It depends what you're going to use it for. You know if you're going to buy other properties with it. If you are, listen, you know the insurance stuff. Right now, you got to put on a new roof. You got to do this and that there's no way. Even if you showed someone a hybrid of 2.75 and 8.75, you know to try and refly. It's not worth it. So you know the good thing about the Helox is it's a per diem charge, right? So if you borrow it and pay it down, it's not like you're fixed in at this amount. You can pay it off. You can move around. People need flexibility.

Doug Schmitzer:

Just had somebody that was doing a did it on their house to buy a property cash, because they knew it was just easy. They had multiple companies, everything else, and you know I'm not a big fan of Helox doing that. I usually refer them out, but we do. There are some that are available five days, you know, but they do actually do them in five days. But you're going to pay, they'll do them. On investment properties Wow, they'll do a second home and investment property, helox. So we've been doing those because a lot of people own them.

Michael Notbohm:

See, now that I can see you know helps you Go buy another one down payment to buy another one right but you're at 12, 13%.

Andrew Hoek:

You know what I mean as long as you're taking that money and putting it into something that I think is an investable asset somewhere else, so that does make sense. I don't know how much that is. You know, on the consumer market is really being done versus, like you know, tap into, pay down your credit card bill or something you know like those.

Doug Schmitzer:

Oh, the problem is you know that stuff is typically, if someone's got 21%, they're like, hey, get this equity line at 10%, you can pay it down. But they usually just make the minimum interest payment on that as well. It's usually a lifestyle whether you pay things off or just ride through it. People. It's like a zebra with the stripes, right. I mean I've seen people take out loans and cash out refiles, be like I'm going to pay everything down. Then they go to Vegas. Oh, I got a guy he travels all around.

Doug Schmitzer:

He'll tell you about his whole life on Facebook. This guy, you know he's came to me with problems and he's I'm like what are you doing?

Michael Notbohm:

You said you're going to pay this stuff down. We always make the joke. Tampa's like the home with a $30,000 a year millionaire. Yeah, like they make 30 grand, but like when they go out you would have no idea that they're not a multi-millionaire Like, but they only go out one day a week Because that's all they're for.

Andrew Hoek:

With inflation, it's not like the $75,000 a year, right, yeah.

Doug Schmitzer:

We used to one of my boss up north used to call. He said he said you see these people driving these Lexuses and everything else. He's like you can live in your car but you can't drive your home. It's like some people are buying all these big cars. But I'll tell you that when I was younger you're talking about people acting like the millionaire, making inflationary $75,000 a year. So when I moved down here, I was like I got to start networking more and everything else. So I joined the Tampa club back in the day Because you know, poma Sia took forever to get into.

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I was still in my head I'm 30, you know.

Doug Schmitzer:

I'm 30 years old. You guys are young bucks, but I mean it was the easiest way for me to start meeting people. They had an under 40 networking group and everything else Right. So you go in there and it's a little different than it is now. It had the old school like dogs and playing poker pictures hunter green chairs.

Andrew Hoek:

you know it was a man's club.

Doug Schmitzer:

It was a man's club, right. So we went in there and then you'd meet these people and I'm not obviously not going to say their names or anything else, but you'd make your connections and you go to do their refi or their purchase money like holy shit, like yeah, you know, and they would treat the staff like crap there, like you couldn't. You know they wanted to feel important and it was just kind of like back then it was kind of weird to see, but it was people that had to keep up with the Jones's kind of mentality and weren't able to do that one. Yeah, when you look under the covers you're like what are we doing here?

Andrew Hoek:

Yeah, yeah Well, I don't think it's like that.

Doug Schmitzer:

As much here anymore, is it? I live up in Odessa now, so you know.

Michael Notbohm:

I mean, I think that it definitely is still, you know, to a certain level.

Andrew Hoek:

I think there? I think there certainly is, and to me, I think there's an interesting aspect of like there is really a true influx of of much higher paying jobs and more money coming into this area. Yeah, and again, I think with this a little more micro level than than macro, of course, but I think there's almost an element of like, if you've been here, you're used to certain price points on things you know, and now you've got these people that have flooded in since COVID and they've pushed things up so quickly where, like, if you aren't used to that or you can't truly keep up with it, that's a that's a steep curve.

Doug Schmitzer:

What kind of phase you're talking about?

Andrew Hoek:

I think housing prices, I think, like you brought up Palma C, like we just had the membership meeting there and like the, the, the initiation fees have jumped significantly on that I mean for something that was pretty steady for a long time and like, but there's such a flood of people that have interest in that type of thing and have and have to suppose one thing to do with raising it so that they, basically, they'll take the cream of the crop. Yeah, and so you know like, and I you know.

Doug Schmitzer:

I mean Cutting down on the.

Andrew Hoek:

Jessys.

Doug Schmitzer:

Hopefully not.

Andrew Hoek:

Cause. That's a key to going back you know, but you know and you talk about just I mean like everything inflation. You got the dinner.

Andrew Hoek:

It's more expensive, but I think you know you have more of these high end restaurants than I think you do of like, just sort of like the mom and pop starting up and so like, even though it might be more expensive, no matter what, you're talking about a different level of dinner that you're going to now and so, like all those things, crunch you and I think you know if you, if you were used to things here and you were comfortable with here, and now they're here and you've got to bridge that gap that becomes a little bit of a I mean not a little bit that is a strain on people.

Doug Schmitzer:

So that's higher end stuff coming in down the water street and the addition. And you know that's what's the restaurant, in the addition that there's only one in New York and Miami.

Michael Notbohm:

The Michelin, yeah, I haven't eaten there yet, but I've heard good things about it. Is it like a Greek restaurant, right, and I don't know, lilac, that's what it's called, I think. Yeah.

Doug Schmitzer:

Yeah, but no, it's. I know what you're saying. They're catering. I mean they're becoming a real city, right?

Michael Notbohm:

Yeah.

Doug Schmitzer:

I mean back when I moved down here, when milk was in nickel you know, you walked up hill both ways to school In my sandals.

Andrew Hoek:

Yeah, so I mean.

Doug Schmitzer:

Howard Ave is like kind of where you went Hyde Park and then you know there was no. I mean, that was it really? St Pete wasn't a thing you know, at least not that I knew of. And everything's expanded, everything's changed. No one was downtown at night. You know everything else. But right, I guess we're getting off point. Well, no, so we this mastermind.

Michael Notbohm:

We went to last week. They had a panel where you know it was kind of a variety of different professionals, but you know, they said one of the I think the wrap up question was like if you had one thing, like tidbit of information you could share, like what is you know, what would that be? And the one lady that's a big multifamily said invest in Florida. And and to your point, you've read that article.

Michael Notbohm:

I mean, people are moving to Florida yeah, from a lot of the you know, typically from the Northwest, or I mean the Northeast. You're seeing a lot of people from California. I mean California is having a huge decline, I think, of their population because well, in that ladies portfolio was largely California.

Andrew Hoek:

You know, remember she's, and they were like we're looking at that is their alternative to California.

Michael Notbohm:

Now, yeah, and I say this all the time, like you know, if you live in San Francisco and you work at Walgreens or you know the grocery store when do you live To go to work. Because even like a studio apartment is a million and a half dollars there. You know buying it, so I can only imagine what, what the rent is, and so you know, I think you're starting to see, you know that area and really all over some kind of more creative stuff. I don't know if you have you heard a pad split.

Doug Schmitzer:

No, is that for?

Michael Notbohm:

it's a really interesting model. I mean, I actually got a little bit deeper information on it, you know, in the last week. But basically, like you take like a four bedroom house, for example, and like the dining room you convert into a bedroom, the living room you convert into a bedroom and the only real common space is the kitchen and you just rent each each room Weekly it's like a city, the city type, co-op type thing yeah you know what's gonna be interesting to watch with that, though?

Andrew Hoek:

It's talking to a guy about that the other day and he said he said the one thing he's learned is that because so they'll buy a property with hard money with the intent of refinancing into a longer product, and Then and then they will do this, this pad split monologue. But what do you? What he ran into on one of the few early ones is he's like we did, we bought with hard money, we went in and we did the work to make a pad split and he's like, and then we go to try to refi it on a longer term.

Doug Schmitzer:

It's not set up like a house.

Andrew Hoek:

He's like these appraisers come in and they're like what the hell is this? We don't have any comps or a ten bedroom on Something that is like you know, two thousand square feet or whatever you know, yeah there always one similar, similar comps for the appraisal fund.

Doug Schmitzer:

The deal.

Andrew Hoek:

So from a financing perspective is kind of interesting to see like what, what, and I do think the financing industry does a pretty good job of like having to adapt for Market trends and maybe you feel differently about that, but but I think generally they do a pretty good job. I'll be interested to see if something is created around kind of that product, so that it's not just because this guy's solution is, he's like I'm making so much money on it, I don't really care what my loan product is like if I have to just keep it in a bridge loan. He's like oh for, until some something happens or I sell it, fine, but you know, if you didn't have that option, unless he has the private money that we had on the Ola property.

Andrew Hoek:

Yes, exactly.

Michael Notbohm:

You're not. You're not allowed to keep that where?

Andrew Hoek:

where's this?

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house In this area.

Andrew Hoek:

There is area yeah but but you know the whole idea, of course, as you go in and you, instead of having three or four bedrooms, you, you max Nice common areas and then and then you share the true common areas and they do them on like I think I've got a couple Clients are like weekly on them.

Doug Schmitzer:

Longer term hourly.

Andrew Hoek:

I'm sure there is some of that.

Doug Schmitzer:

It goes on, but you know it sounds cool. I get the concept. It's you know. The other thing about it, though, is You've seen other places trying to get rid of air B&B's out by the beach. You know you mean and everything else, because the people around it it's not even, it's not even an HOA. Right, the condos are, but I mean even short-term rentals live as a treasure. I don't I forget which was down there, but you know I wonder how long that's you. That's fine if you're buying it in the city. Yeah, I think you know what I mean, but if you, I don't think you can do that somewhere.

Andrew Hoek:

Well, it almost seems to me like the beach trend, and you keep up with us, probably a little more than I do, but the beach trend for so long was no, no, no. We're cracking down on this. And then I heard recently that a few of these that were like you couldn't ever even Thought about doing that before now have. I mean, they're tight. You got to be within their restrictions, but they're. They're almost being forced into creating some type of Scenario where you could do it.

Michael Notbohm:

Well, I think the part of it is you have to. You know it needs to be a win-win for everyone, right? So like, if you're, if you have an air B&B and you're allowing people to party and you know, go crazy, it's not good for the neighborhood, it's not good for your property either, and I can see where people are going to crack down. But you know, we had a guest on here a while back talking about air B&B's and he made a good point saying when you're going to get into that space, you have to really view it as you're in the hospitality business, not in the real estate investing business. And so I think that part of that is creating that Environment for your guests, but also the environment for the neighborhood. Yeah, that's.

Andrew Hoek:

That's why I'm running paper towels at 9 pm. Right, yeah, exactly single point, yeah, so.

Doug Schmitzer:

Well, you know the other point to that too.

Andrew Hoek:

I guess you gotta think about what's that. Gotta save that money, can't hide money.

Doug Schmitzer:

So the uh. The other point to that I guess would be you know, a lot of these people bought these properties just for air B&B, right? So if you stop that, they're gonna freaking go under right. And then all of a sudden the values are gonna come down because you got foreclosures in your I don't know, I'm just saying there's gotta be a happy median, I guess, but a lot of people that you know they were talking about. That Common if people shut down on these air B&B.

Andrew Hoek:

What did new york do? Have you followed that?

Michael Notbohm:

Well, they have like, um you know, like you know, like the hot dog stands in new york, there's a certain number of permits, so essentially they're changing it to that model like there's a certain number of permits available for air B&Bs, so the you know you're registering, you're registering for the city. Well, a lot of times what they're looking at it is like you're. You know, the hotels pay a hotel tax. Yeah, and air B&Bs weren't for a long time.

Doug Schmitzer:

Not a lot of hotel room left out there in new york right now. Yeah, I know, yeah, not any.

Michael Notbohm:

Yeah, exactly.

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That's a whole other issue. Yeah, the whole other issue.

Michael Notbohm:

But I think when you you know when you are actually Abaying, like whatever the local tax laws etc. Then they're okay with it. Yeah so I think there needs to be. You know the regulation. I don't think it's all bad, but you gotta keep some people in line, but yeah. And then there's areas that you know, like neighborhoods that are pretty much all air B&Bs right, which is probably the the most optimal scenario, but that's not, you know, overly realistic, I think in most areas to your point.

Andrew Hoek:

I do think. I do think it's interesting to watch. Like I'm always leery about these stats you see online, but I saw, I saw something. I was talking about the number of Short-term vacation rentals in the city of Austin versus the number of available homes for sale. And it's staggering what the difference is like the the number of vacation rentals is significantly higher Than it is on the number of homes that are for sale, and you know is rents are so high.

Andrew Hoek:

Uh well, I think you have so many people that got into that, into that market of short-term rentals and saying, like you know, we're gonna. It allowed them potentially to. Maybe maybe they buy a second home and they do that on the side or whatever the reason. Where is that? They got into it? But they're. It's just been so flooded and you have so so much inventory in that side of it. No-transcript. You know, the catalyst event, I think, is almost like how how do you stop pricing going from going crazy? It's, it's a simple supply and demand issue. So I think you're right if there is a catalyst event that forces some of that back onto the market. Now you've eased some of that supply issue that you've had and maybe you do see some pricing changes on things.

Doug Schmitzer:

So yeah, it's interesting, I get you know. It's just a lot of people buy these based on the Airbnb rental incomes instead of what you can get on a 12 month lease and we tell everyone you know, like in our course, if you're gonna underwrite an Airbnb, underwrite it like does it cash flow?

Michael Notbohm:

if I have to do a 12 month?

Doug Schmitzer:

yeah, stress, and if it doesn't, you can't buy it. Now you advise them to at least have a 12 month history with the Airbnb well.

Michael Notbohm:

So we use air DNA typically for our metrics, which I think is it seems to be extremely accurate I mean the banks for, like, if you're gonna do a DSCR loan and it's gonna be a short-term rental, they actually will allow it. Yeah, certain ones that Airbnb with a history of it typically yeah but I mean if it doesn't cash flow as a long-term rental, because if you buy it only for an Airbnb and then the problems could be hey listen, you can't do it anymore now.

Andrew Hoek:

I think the one we just did. They forced us to to give comparables on long-term rentals to, even though they knew we were gonna short term run.

Doug Schmitzer:

They wanted, they wanted a 10-07 a rent schedule.

Andrew Hoek:

Well, they area yeah, they wanted information basically about what it, what would it long-term rent at, because they want to make sure obviously that there's that option and they can sustain it that level, yeah, so which is interesting because you remember that DSCR we're talking about the DSCR product.

Doug Schmitzer:

They want like a one-to-one ratio, you know, or higher if you get better pricing 1.15. But now there's some that don't require any minimum yeah, I think we.

Michael Notbohm:

You know we're browsing.

Doug Schmitzer:

There was one that was like a point eight oh, but now there's yeah, they go down to point eight, that's, I mean a wring. Funding has that different ones, but I mean what could go wrong? With that, nothing, you know put a negative am loan on there.

Michael Notbohm:

Yeah, but now there's something don't have minimums.

Doug Schmitzer:

That just came out. But I will tell you from an investment standpoint. I just signed up with a new lender I gotta get. I just got there yesterday. Pretty sure you gotta live on one side, but they're doing a hundred percent duplex financing if you live on one side, so that can also help offset some of the higher rate costs for people yeah, and it helps people get it, get their foot in the door and investing you know, literally yeah

Andrew Hoek:

yeah and at least half, you know half the door yeah, yeah, I mean, I love that and that's why, that's why we wanted you to come on was you know, wealth of knowledge and in different, in different financing options and well, one thing you were just saying earlier we were talking about, hey, if this you like, how the market kind of evolves itself and there's a need, right, yeah, and I totally agree with that.

Doug Schmitzer:

Not Fannie Mae, freddie Mac, fha, any act crap. But if there's a need for something, that DSCR product blew up in three months, you know, and in me because, like, hey, how can we get these investors making easy? Rates are going up? There's gonna be, just because competitive with the rate is conventional and everybody has it right, and before that it was the bank statement loans. You know, you get the bank statement loans that you can use for investments and everything out. Well, mostly primary on that. But bank statement loans for people are right off everything. They own their own company. I mean, you're right, the market adjusts yeah and has a niche for it.

Doug Schmitzer:

You know anything that comes to play. So I do appreciate that. I do see that. Yeah, it's just that they make it tougher and tougher on jumbos and Fannie's the LL, these loan level pricing adjustments by way around one this morning just before it came in, so so I could be up to date on it from yesterday, because yesterday was pretty good day. Rates bounced back a little bit, but it's a live market, right it is.

Doug Schmitzer:

I would do it literally, literally yesterday I had to lock one and we were gaining. And you know how it is it's the rates. Rates go down like put a rubber band over your finger, and then that's how fast they go up and then you can't lock in between till the dust is settled, and you know.

Doug Schmitzer:

So, you, you got to do your job here. But the best part is or the worst part is, you don't really know, because they don't really know what's gonna happen in the next 45 minutes. So I get it every five minutes. So I'm refreshing and refreshing until because I get to get 20, 23 to 32 bits for an adjustment. So I'm watching. It's at 19, it's going up here and then it, once it plateaued out, I called, called the bar is a lock. It we locked and so you know. You got to really keep track of the live market.

Michael Notbohm:

Instead, every five minutes, I think I'm gonna upgrading the live, but it's like an auction, yeah yeah literally it is so let's, let's switch gears a little bit, because you know, kind of in closing, the one thing we've always respected out of you is you have a really good work life balance. So we talk a lot on this not sure my wife would agree. Yeah, wait you're going hunting again what the?

Michael Notbohm:

hell is going on. But you know, a lot of times we we talk about legacy and what that means. You know, and I think you do a good job of still carving out away from the office the things that you love to do. Your family is important to you, so talk a little bit about what the legacy piece means to you, and means everything.

Doug Schmitzer:

I saw a guy talking on. I have a daughter and a son, my son's older 18 and 16 and you know this guy was saying he said you want to define success. He said you can define success by your children wanting to hang out with you when you're an adult, when they're an adult. And you know, I've just learned about this because my son just went to school the summer. Right, I put in. I've had people ask me, you know how do you I'm maybe a little pad on back, whatever, my son and I are very close, my daughter and I are very close and I think I've done a good job because I was super involved. I would leave the office. I coached his football team, the Hurricanes, you know, head coach a couple years, coach five years, right, and I took the time at five o'clock, 5 30 to be there, you know, four days a week. And did I lose money? I lost money, people, you know, but it was more important to be there. My daughter was a cheerleader there and my wife was coaching them. So it's kind of we all kind of hung together, family, just basically putting in the time with your kids is just amazing, you know, and they respect it and they get used to you. That's why I started hunting more. You know, my buddy, christian, got me in the hunting years ago. Then, when I got my own hunting camp selfishly it was so when my kids got older they'd want to come up to camp, ride ATVs, go fishing. You know, shoot bows, whatever you know.

Doug Schmitzer:

So basically, you know you gotta basically separate out what you want with a family If you have kids, even if not, you need to reduce yourself. You know, because I found, when I was up in Philly you know I wasn't married and I was working. I worked one time, from January 1st to April 14th, and Amy was living with me and she got a second job because I was never home and I found myself getting kind of angry at my clients and snappy, and you know why, it's because I was burned out. Man, you know what I mean. Like you gotta find, you gotta take time to decompress and re-energize yourself. And you know, do I sometimes take off a little too much? You know, on a Friday afternoon, yeah, but I got my laptop with me and my MiFi, but I will go hunting on the weekends, I will go out on the boat fishing and take the kids out in my family or my friends. I like to have fun. You know what I mean, yeah.

Michael Notbohm:

But it is Well, I think, the success piece that you're talking about. You have to have what that is for you, because otherwise you know what are you working for.

Doug Schmitzer:

Right, you know Right. It's like that Oliver Anthony song, you know what I mean, like you're gonna work all day and then I thought it was really interesting.

Andrew Hoek:

One of the speakers at the Mastermind we were at this week quoted Sam Walton, and I had never heard this before. But apparently some of his last words were that he got it wrong. And I mean you're talking about somebody that achieved the absolute epitome of financial success, you know. But when I looked into that a little bit it was like he didn't have a relationship with his kids, didn't know his grandkids which I mean it's funny because they're all living off of those trust dollars.

Doug Schmitzer:

That's probably how it. That's probably what he thought was he was helping them instead of being part of their lives, but I mean that's.

Andrew Hoek:

I mean, that is such a good message that you have there, because you don't want to end up like that, where it's like you know you get to the end and you're regretting what you've done because you overlooked the stuff that really matters.

Doug Schmitzer:

I'm always gonna have summer regrets, right, yeah, just not on that side.

Doug Schmitzer:

But, like I'll tell you, like you know, we sit pretty close to each other. The lightning games, right, yeah. So when my kids were young, they liked hockey, so I got season tickets, you know, or half season, whatever it was, and we'd go to the games and spend time. It became time with the kids and we spent time with the kids going to hockey or whatever it might be. And then, on a different level than that, right, as a man, I'm 52. I can't believe that I'm still gonna. I don't know what I'm gonna be when I grow up. You look, 22, though.

Andrew Hoek:

Yeah, yeah, and this is Act 22.

Doug Schmitzer:

Act 22. But you know, I got this hunting group. I don't care if it's a fishing group, whatever you're into, it's like a fraternity. I was just showing this morning my buddy's up there. Yeah, I got 10 guys that I can depend on, crack jokes with, get made fun of. You know, every day there's a string and I just enjoy their company. You're like brothers, man, and it's important, I think, whether you're female or male, to have that little group that you can be honest with and decompress and kind of maybe get some advice or laughs or I mean it's super important yeah.

Michael Notbohm:

Well, and you were saying you know when we're talking about quotes and stuff. I don't know if you remember this one, but this guy had, you know, kind of gone through a roller coaster of ups and downs in his life and he said the quote that he literally lives by every day is a man with no wealth has 10,000 wishes and a man with no health has only one. Yeah, yeah. And I think that's a part of it too.

Michael Notbohm:

you know, when you look at the legacy piece like yeah, that's huge, you know and that was like super powerful to me because I'm like you know what, you're right, everyone, you know like.

:

Sam Walton, you know all the money in the world but man, I wish.

Michael Notbohm:

I had more time now to go back and spend it with my family or whatever that is for. You know, we always tell people your legacy is your legacy. I mean, it could be anything. It doesn't have to be in a box, that's, you know, society's norm. But you have to have some definition around it, I think. Otherwise it's going to be very difficult to achieve a lot of success if you don't really know what you're working for.

Doug Schmitzer:

Yeah, and then the key is to have them pass it down.

Andrew Hoek:

So, along those lines, let me ask you one question before we go. You're at this kind of what I think is probably going to be a really fun point for you with you know, your son heading off to college and like you know he's hitting this point where he's got his own independence, starting now, and like what would you say your best advice to him as he picks a career path and starts thinking about his future as far as, like, his own life and trajectory would be?

Doug Schmitzer:

So he knows that, like on a social side of that, that basically he would eat three meals a day when he was doing football and then come home he'd eat dinner before we leave and I'd make him, I'd make him dinner after football and he's like dad, thanks so much, thanks so much for making another dinner. I'm like you do it for your kid and like that's what you do, okay, like I'm doing this to show you how I want you to treat your kids. Yeah, and we would do it that way. Now, when he went off to school, you know he understands that need good grades, you know, and everything else right. And you know he's already applied for an internship this summer. He's like this is so easy because I got to do something. So he knows to work hard, right, and he sees that I have fun with his uncle Greg and stuff like that. And we're like look, work hard, play hard, right, you don't get to play hard unless you work hard and he kind of gets that he's. You know he's starting to feel himself a little bit at school, but he gets to school work done, you know.

Doug Schmitzer:

But if you get into a business, it kind of goes to your investment side. The one thing I would tell him I would have done differently that I is if you're going to get into business for yourself, you need to have some pillow money or residual income. You know the one thing you know I do well, you know whatever, I love my company but I have to go out and close deals every week. You know what I mean. And my company is not worth much to somebody else because people buy me. You know, and it's I mean. You can buy a roll of clients from 20 years.

Doug Schmitzer:

No one says they're going to use you you know, but you know I'm advising him, you know to basically, if you're going to go into business by yourself, something with pillow money, you know, but always trust in yourself. He's a good kid.

Michael Notbohm:

He's well adjusted from hanging out at camp with adults and it's got to be one of those proud moments for you seeing him, you know, like it's a testament of how good of a dude you are and how great of a father you've been to see your kids turning out. They're hard workers?

Doug Schmitzer:

Yeah, and I think it's just got certified for swimming and water seal the Watermelon Seal Club or you should be Swin Seal. She's worked with ESE children ever since she was in kindergarten. She's a hard worker. She babysits Now these kids. I have faith she babysits my kids. She babysits your kids. They're alive, right, that's right Still here to tell the stories but.

Doug Schmitzer:

I have faith in these kids. Man, you know, I think some people might have lost their way a little bit. Not judging, but it just seems like some of the core want to work and maybe it's because of who they hang out with, but these kids are pretty driven right now. So I don't know if that answers your question. It does.

Andrew Hoek:

No, I just I mean, that's part of why we love doing this is it's like it's as much as the investing in the work and the, you know, financial side of it. But like, I think, at the end of the day, what really brought us together and wanted us to do this was what we're just talking about here is like, how do we set ourselves up so that we're maximizing what we're giving to our kids and and and to our own legacy, and how that flows after us?

Doug Schmitzer:

Yeah, I mean, it's not just about money.

Andrew Hoek:

Right, exactly. This is how one thing is done.

Doug Schmitzer:

This is what I want you to be, and that's you know, you raise real human beings yeah.

Michael Notbohm:

Well, we appreciate you coming on. Yeah, I think it was some great having yeah. Here in the Legacy Wealth Code Studios. That's right. 10th floor Right, all right guys. Well, until next time. This has been the Legacy Wealth Code podcast. We'll see you soon Onward.

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