Welcome to The Get Real Podcast, your high-octane boost and in the trenches tell-it-like-it-is reality therapy for personal, business and real estate investing success with your hosts, power-preneurs Angela and Ron. It’s time to get real!

Angela: Hey everybody, welcome to the Get Real Podcast. This is Angela Thomas and I’m here with Ron Phillips. Hey Ron.

Ron: Oh man, here we are.

Angela: Oh man. Hey.

Ron: It’s going to be good.

Angela: Yeah. So just a quick reminder, if you haven’t, check us out at GetRealEstateSuccess.com subscribe to our podcast. Give us some love on iTunes or there. And just as a side note, you can also, you know, if listening to this isn’t exciting enough, you can also watch our podcast on YouTube.

Ron: What, stop it.

Angela: I know, I know. So if you want to see our faces while we’re talking because it’s pretty exciting go look us up on YouTube. It’s actually under Invest Prop Coach is the username and we’ve got a whole channel of education.

Ron: We are beautiful people. So in the event that you, that you need a little bit of sunshine in your life. Look it up. Look it up.

Angela: Yes. Go watch us while we’re talking much more fun. Okay, all right. So thanks for that Ron. So we are, today we are talking about equity. We just kind of want to talk all about this topic. It’s a great time to talk about it because as everybody knows, the market is a pretty, I mean, I don’t know if it’s tapped out, but it’s pretty high, almost everywhere right now, the prices.

Ron: It’s been smoking something really good for 10 years and it is really high.

Angela: It is really high and it likes being high, it’s happy.

Ron: Yeah buddy. Are we back to real estate, this is fun. We’ve been off of real estate for a minute and this is going to be fun I like it.

Angela: So chances are you guys, because of how the market is right now, if you’re listening to this in 2019, it’s, you know, chances are you have some equity, you know, either in your investment properties and your personal home or both so.

Ron: And you may not even know because you haven’t checked.

Angela: Yeah, yeah.

Ron: So this is your opportunity now to, man, you better check, it’s time to check.

Angela: Why not? I mean, you know, Zillow is not exactly trustworthy, but it’s an okay place to start, just to get an idea. It’s probably way off, but it’ll give you an idea.

Ron: It could be dead on or way off one of the two.

Angela: For me in my experience, it’s usually way off, but it’s not so far off that it, you know, doesn’t give you an idea of whether you have equity or not. So just find out and then you can talk to a realtor and, you know, find out real numbers. But, so what we want to talk about, you know, when is the time to sell and is selling to your advantage and how can it be, how can you make it to your advantage? How do you take advantage of this equity?

Ron: Or should you.

Angela: Or should you. Yeah, I mean we can’t tell you that exactly.

Ron: Because you know, who knows. It just kind of depends on the individual.

Angela: We’re going to give you our opinion and don’t come back and tell us, hey, I shouldn’t have done that because you got to make your own decisions. All right, this is our unsolicited advice and what we do.

Ron: And because this is just how we are. We may make fun of some people and you may get your feelings hurt. And that’s okay to, still leave us some love on the channel though. Like don’t be a hater just because we made fun of you.

Angela: Yeah, we still love you. I make fun of everyone I love.

Ron: We only make fun of the people that we love. I mean, that’s for starters. So in the event that you feel like you’ve got made fun of today…

Angela: You are loved.

Ron: Yeah. Just know that that comes from a place of deep love and caring.

Angela: Awesome. Okay. So Ron, let’s start out talking about investment properties, okay. We can talk about personal residences in a minute.

Ron: Can we, because that’ll be fun.

Angela: Yeah. I want to talk about my personal residence, so.

Ron: Okay, go ahead let’s do that. That’ll be fun.

Angela: Okay. So starting out though, let’s talk about investment properties. So maybe do a quick, can we do a quick refresher on calculating our returns?

Ron: We probably should just in case somebody jumped ahead, didn’t listen from episode number one, shame on you. Go back and make it up.

Angela: No, no. Start on two, don’t listen to one please.

Ron: Don’t listen to one that’s right.

Angela: I was just kidding.

Ron: Who wants to listen to that. Okay, so a return on investment, real simple. So let’s take some really round numbers so that I can do the math. Let’s say we’re going to buy $100,000 single family home. We’re going to put 20% down. And since this is not about return on investment, we’re not going to talk about all the other stuff. We’re just going to say that the property after all expenses, cash flows, $300 bucks, $3,000 a year, okay? Whatever that is a month $280, whatever, okay. $3,000 a year, positive cash flow after all expenses. And in order to figure out return on investment, you simply take your cash return that $3,000 that you got in your hot little hand and you’d divide that by your investment, which in this case, 20% down on $100,000 house is $20,000

Angela: Very important point I just slow down for everyone. You’re calculating your taking your investments, not the price of the home.

Ron: That’s correct. So get your phone out. Now, I don’t know, maybe you can’t do this if you’re listening to the podcasts.

Angela: If you don’t have a calculator on your phone then I don’t know what year your living in.

Ron: Yeah you can just play this in the background. Just get your calculator feature out on your phone and plug this in so you know how to do it. So it’s really simple. $3,000 divided by $20,000 gives you a decimal point plus a couple of numbers, which are 15.

Angela: .15.

Ron: Okay. That means if you go back to grade school, you know that you move the decimal over two places for percentages. That means it’s 15%.

Angela: 15% cash return on investment.

Ron: 15% cash return on investment, okay? Simple, everybody gets it.

Angela: Got it.

Ron: So why would we then, so since we’ve had that now I guess the question that we get at our office a lot, after a year, two years, three years, whatever it is, people will call in and they’ll say, hey, how do I know when I’m should sell or should I sell? What should I be doing with this property?

Angela: Because definitely a huge part. I mean, if you guys haven’t built a wealth plan with us and our company, a huge part of this plan that we build for everyone who works with us is, you know, the way we help them reach their financial goals is by a huge part of is repositioning and when to reposition. And that means, you know, when do you sell your properties and hopefully reposition that equity into more properties or the next level of properties, multifamily, apartments, whatever. So everyone has multiple times in their plan where they reposition. So sorry, Ron, I’m not trying to interrupt you, but calculating return on equity lets them know when to do that.

Ron: In addition to that, I think people need to realize too that, I mean it’s easier when you can see the plan visually in front of you, but I think you guys can follow along. So if we put $20,000 into this property and then, you know, over the next couple of years you’ve owned this thing, you’ve been cashflow and you’ve gotten your returns, it’s been fantastic. People are paying down your mortgage and all that stuff is happening, right? We talked about all that stuff in previous episodes. So now we’re on a property, we own a property and it’s worth $150,000 bucks, okay?

Ron: We got some equity in the property. We put the $20,000 is in the property. We didn’t spend it, it’s in there. So we owe $80,000 or less because we’ve been paying, but not, not a ton less, okay? So let’s just call it $80,000 and we’ve had appreciation of $50,000 so now we have $70,000 worth of equity. So what do we do here? I mean, and when do we know that we should at least be looking at maybe selling or doing something? We repositioning this, this assets, right?

Angela: So if you go on Zillow and it says you’ve gone up $50,000 or $60,000 or a million, whatever the price. So you know that there’s some kind of equity there. How do you calculate what your return is now? Your return changes.

Ron: On a side note, Angela to derail us and now that you’ve said Zillow like two or three times.

Angela: I know I’m sorry, I’m not doing a plug for Zillow.

Ron: I have to do it because we actually had some of our clients who their little single family homes that they bought for $150,000 were worth like $1.1 million in…

Angela: Holy crap. I don’t know if I heard this story.

Ron: So we took a screenshot of it. We have a screenshot of this it’s so funny. Then the reason is because Zillow there was an apartment complex that was built at the same time at the front of the subdivision. And so they comp the houses against, not all of them, I mean just some lucky individuals comped against the against the apartment complex.

Angela: So you look at Zillow and all the sudden your house is worth $1.5 million.

Ron: Oh, that’s fantastic. I mean, if you could only cash in on Zillow’s. Maybe the whole Zillow buyer thing…

Angela: Yeah your like, Zillow sell it for me.

Ron: They’ll say 10%, we’ll guarantee you 10% less than whatever. We have it on there for that. Yeah, take that bad boy for $900,000. That’d be fantastic.

Angela: It’s worth a shot, it’s worth a shot.

Ron: Complete side note, but yeah don’t, Zillow is not the Gospel for sure. But if Zillow does say that you’ve got some equity, you should definitely check into it because you very well may probably not $1 million, but you may. And then, so what do you do with, you know, there’s another calculation, Angela, that will tell you really quickly. Because you know, a lot of people they call our office, but they’re like, yeah, but it’s coming, it’s cash flowing. I can get a really, really good return on my money, so why would I want to sell it? And that’s a very fair question. One that everybody should ask themselves.

Ron: So really quick calculation is to do a return on equity instead of a return on investment do a calculation on return on equity. And it’s super simple but very eye-opening. So let’s take the same property. It was returning a 15% cash ROI. Is it still doing a 15% cash ROI? Yes, it is. Are you still making 15% on the money that you put into it? Yes, you are absolutely. But are you making 15% on all of the money that you now have in that property inequity? The answer’s no.

Angela: And people don’t think about that, right?

Ron: So here the market has given you a gift of $50,000. It just said, hey, you’re a cool person here’s $50,000 grand and you are saying, Nah, I’m good with my $20,000. I’m good with my $20,000.

Angela: I only want returns on my $20,000.

Ron: I got my 15% and it’s doing really good on this, on this $20,000. Now if you actually care about those other dollar bills that are sitting out there really wanting to work hard for you, if you care about them at all…

Angela: Kevin O’Leary on the Shark Tank would say that you very well should care about those little lonely dollars that aren’t working okay.

Ron: Right. They want to work.

Angela: They are sad, bored.

Ron: They’re the greatest employees you’ll ever have, fantastic workers.

Angela: You got to put them to work, come on.

Ron: So here you got, now you have $70,000 of them. So the calculation arereally simple. You take your $3,000 cash flow because that’s still your cash return and you divide it by your equity instead of your investment. So $3,000 divided into $70,000 that gives us a grand whopping total of 4.2%, which is horrendous. You can probably get a stock that returns on dividends that returns 4%.

Angela: Yeah that’s terrible. You went from…

Ron: Gosh you still can’t get that at the bank. I mean, you’re still going to get like, you know, a quarter percent or something.

Angela: Wow. That’s crazy.

Ron: So, now in my opinion, what you should do in the market gives you a gift is you should unwrap that freaking thing and you should play with it because it’s a gift that was given to you. So here we have $50,000.

Angela: We went from put it to work to play with it, but you know, that’s cool yeah.

Ron: What happens when you take $70,000 and you invest it? I mean it’s really cool. Let’s just say all we can get now in the market because you know, everything went up, but let’s just say we can go in the market, we get 10% on our money. Now, some people would say, but if I’m getting 10% on my money, now I’m losing money because I was getting 15% but you’re getting 10% on $70,000 instead of 15% on $20,000. It’s a bigger number. In addition to that, you now have three more you have that you can buy three assets with that.

Ron: And the three assets that you purchased, did you put any more money into them personally? Nope. You unwrapped that market gift and you sent the little guys out there to work for you, it’s fantastic. So you could buy the exact same price point of home and you could buy three of them, have a little bit of money left over and you can even do a 1031 tax deferred exchange so you don’t have to pay any capital gains taxes on it and you can put it all to work and it will all be fantastic. You’ll triple, triple your cash flow and triple the opportunity for you to have another round of appreciation over time.

Angela: It seems like a no brainer to me, but it does take work. You know, we’re not going to say it’s just super easy to sell your home and go out and find new ones that, I mean it’s a process, but you don’t want to stay there and make 4% on your money, right.

Ron: Well, and you don’t want your money to go away. So here’s the other thing about this, the crazy thing about the real estate market, everybody should probably know this already, but it goes up and then it goes down and sometimes all that cool market gift equity that you got. If you wait too long, it all goes away and then you have to wait for it to happen again.

Ron: For instance, we had, last time we ran this thing all the way up. We had some people in Boise, we said, hey, you know, you might want to sell because the market’s getting pretty high and your house value has doubled. Back then they would buy a brand new single-family homes for like $95,000. Now they were worth around $180,000 and they were like, they said the exact same thing. They said, no, I really like my returns on this house and I’m just going to keep it and I’m just going to keep riding the appreciation.

Angela: And then bam, 50% gone back down to the original price. They paid for it and all that equity was gone. And then they had to write it all the way back up. And guess what they did the second time? They harvested that awesome market gift and they didn’t lose it this time. But had they done that before, when the markets at the peak, they would’ve had more cool little assets out there, all growing in value and they would been able to sell three, maybe four houses this time and then do it again into smaller commercial type properties.

Angela: Right. So they’re reposition what we call reposition behind what they would been if they would’ve done it originally.

Ron: A full decade.

Angela: A full market cycle. I just want to make one quick side note here that this is probably super obvious, but, you know, when you’re talking about investment properties, if you were to sell, like, say that example property we were talking about was in Arizona. You know, if you sell it at the top of the market when it’s worth 150,000, right? In order to capitalize on that $50,000 that you made, you can’t just go reinvest in the same market. I mean, duh, sorry, that’s probably super obvious to everybody.

Ron: You know what that sounds super obvious. However, if you’ll recall, Angela, it wasn’t but like two years ago where that very scenario came up in our office and the company.

Angela: Sorry. It was funny the way you said that, yeah.

Ron: When they called our office and they said, hey, we’re thinking about getting a cash out refinance on our property on our two properties in Arizona so that we can buy some other properties in Arizona.

Angela: Oh yeah, yeah this happens.

Ron: And I just was like, my whole brain shook my head and I was like, what are you talking about?

Angela: Why would you do that?

Ron: Because now you’re going to go from a cash flow positive situation to a cashflow neutral situation and you’re going to buy at the top of the market and you’re going to increase the loan on the one property, thus eliminating all of your equity and then you’re going to buy properties with zero equity in them at the top of the market. None of which are going to cash flow as absolute brilliance on display right there. And to boot these particular people, they were being told this by an investment company someone who actually is supposed to know better. And the reason that they were selling them those properties is because why?

Angela: Because they were in Arizona.

Ron: Because they’re in Phoenix. Yeah. Because that’s the only properties they have to sell them.

Angela: Yeah. That’s how they get another sale.

Ron: See I told you we may hurt somebody’s feelings today, but…

Angela: We may have just heard some feelings. I’m sorry.

Ron: But whatever. I don’t even care at this point. So you can leave some nasty comments if you’re an investment, if you’ve got an investment real estate company in Phoenix and you tell people to do that ridiculous, stupid thing that I just said, you can put all the negative comments you want on there and then everybody will know never to buy properties from you again.

Angela: Okay. Moving on. So I guess this does happen. I just wanted to say that that’s one way to just waste all your equity right there and get yourself in a worse situation.

Ron: Oh my gosh, sometimes. And look, it’s one thing to be a new and a novice investor out there and think that sounds like a great idea. It’s a whole other thing to be a company providing, suppose it investment knowledge and experience into the market. Who would tell somebody to do something so stupid. So shame on you and for anybody else who’s gotten that kind of ridiculous feedback go find somebody else to work with because that’s ridiculous, okay.

Angela: Yeah. So, yeah, the whole point here is right Ron, if you take that, you know home that’s appreciated and you sell it to take advantage of the equity, you got to take that equity and go find deals somewhere else that still cashflow at a good number, right.

Ron: And can you do that?

Angela: Yes, well we’re still finding them so yes you can.

Ron: Now for anybody out there who is on the west coast, you have equity unless you bought in the last year or two years, you have equity guarantee you do. And if you want to reposition that, I would suggest to you that that’s a really good idea. Let me tell you about somebody we just helped. This was just a couple months ago.

Ron: We helped the lady named Jane, she bought very smart. Back, when we were trying to get people to realize that you should buy in these areas they got really badly affected by the last crash.

Angela: Back when everyone was scared she bought.

Ron: She bought her a brand new construction. And you would also think you shouldn’t be able to do this, but back then, basically you get the land for free, okay. So basically you were, it was just construction costs. So she bought three fourplexes. And they had a fantastic cash return on investment, the cash return was over, 20% was, they were really, really good. And they operated really, really well. I think this was in 2012, if I’m not mistaken, 2011, maybe somewhere around there. And then there’s just this last year in the end of 2018 we helped her sell that property. She had, she put them around $65,000 down on each of these.

Ron: And each one of them had now in equity of $265,000 each. So she put a total of less than $200,000 down. Now she had over $600,000 to work with, $700,000 in change. And when we did the calculation, her return on equity was somewhere around a four and a half percent, which was horrible. So when we went through the explanation to her and we then we showed her a plan that said, look, you can take the equity from here, you can put it into all of these properties over here in the Midwest, and you can save that equity.

Ron: So can she get the same type of growth that she can get out on the west coast in the Midwest? No, she can’t. She can harvest that equity, put it into safe cash flowing properties in the Midwest. And then when everything falls apart again, we’ll go back and we’ll buy some more properties back over there and we’ll do it all over again. But what she did was she took like less than $200,000 and she net put it into about $750,000 and we were able to do a 1031 exchange with that money into a bunch of different properties. And she also diversified her portfolio into several different marketplaces. She’s now receiving 14% on the $600,000. Now why $600,000 and not $700,000? Because she did all of this with a home equity line of credit back in the day. She bought all these properties on a home equity line of credit.

Ron: She wanted to pay that off in full so she didn’t have that payment and then invest the difference. So the difference was $600,000 bucks. So she invested the $600,000 she’s getting 14% on that. We increased our cashflow by 300% folks…

Angela: That’s sexy.

Ron: This happens over and over and over. And here’s the thing, how much extra money did it require of her to make all of that extra cashflow happen? Zero dollars.

Angela: Zero dollars and she paid off debt.

Ron: And she paid off the original zero dollars because she borrowed that money. So of her own money out of her pocket, she used zero dollars. So she used a home equity line of credit to buy assets that increased in value over time. She paid off the home equity line of credit and then she invested the balance, the $600,000, which is all free money it was a market gift.

Ron: She unwrapped that bad boy and she spent it and it was fun. That’s the gift that keeps on giving the whole year round as cousin Eddie would say, right. So that is why you do return on equity. That is why and that is why you sell sometimes. So could she have taken a line of credit out on her or cash out refinance out on her three fourplexes in Boise? Sure, she absolutely could. But when you actually figure the numbers, it’s better to just reposition the money, right? Because those properties were likely at the top of the market. So what happens if you pull equity out of them and then the market drops?

Angela: That’s what I was just going to ask you, I’m like, what if you take out a home equity line of credit, buy new assets, and then you, you lose the equity in those homes because the market drops?

Ron: Yeah. You know, it was a pretty safe thing to do in 2011 because, well, and I was surprised…

Angela: There was nowhere to go but up.

Ron: They weren’t going down then they were already down. But right now that absolutely could happen. I mean we have been on a run for over 10 years now going up, up, up, up, up, and at some point we’re going to be at the peak and we’re going to come down. Now probably not like 2008, but we could, I mean, something could happen that forces the market to go down that drastically. We can all only hope and pray that happens, but it, you know, it could happen. So I’m not a I’m not a fan of doing that right now. But man, if you’re sitting on a bunch of equity and the market has given you this massive gift, take it.

Angela: Yeah. Speaking of I also, there’s also a bunch of people out there, including me, that I have equity in their personal homes. I thought I bought at the top of the market like three years ago. I was thinking it was because it was getting up there. I was like, yeah, we got to be close. But since I bought my home two or three years ago, I found out that I have between $120,000 $150,000 probably thousand dollars of equity in my home. And I, you know, I could just stay there and ride it out and I mean, I don’t need to sell my home’s fine. But I would like to take advantage of that because it’s a gift. Like you said, it’s free money. So not using it seems silly to me. Got to put those dollars to work, you know? So what are my options with my personal residence when we talk about that for a minute?

Ron: Sure. There’s a bunch of different things that you could do and we should do a hard stop right here and just say, okay. For personal residences and investment properties have a little bit, there’s something different about them in that you live in your personal residence and a lot of people kind fall in love with their personal residence and they can, you know, their kids are growing up there there’s memories there. You know, I personally don’t give a crap. I will, everything I own is for sale for the right price. I really don’t care.

Angela: I’m attached to my library, Ron.

Ron: A lot of people are not like that. And so you have to take what everything. I’m going to just going to give you a bunch of options and I’m not telling you that you should do any of these, Angela. But there are options and people need to think creatively, especially depending on where they are in their lifecycle, right? If you want to retire at some point and you don’t have enough assets and the market has given you a gift of $150,000 $200,000 some of you out there half a million or $1 million and you don’t take advantage of it. Man, I think that’s silly, okay. But again, if you’re in love with your home and you just want to pay it off and that’s where you want to live, the rest of life that’s a whole different ball game.

Angela: We didn’t mention that either and I’m sorry. Don’t let me, we got to come back to my personal residence. But with rental properties and with your personal residence, I mean there’s probably people out there going shouldn’t I just pay it off and have no debt, right?

Ron: Sure. And for the paid off crowd, knock yourself out nothing wrong with that. However, let’s go back to the example of, of Jane. Right? So she bought the, each one of those fourplexes she bought was around $260,000 to $265,000, okay. She paid $65,000 down she was paying on them. Market gives her $200,000. Now she has $265,000 each of equity, right? So now she has the exact same amount of money it costs to purchase them cash, okay.

Angela: Right.

Ron: Now if she goes about paying them off like she was on her mortgage, it’s going to take a long time to make that happen. In addition to that, she’s probably going to lose the equity in her properties. So if you’re a, I have to have my properties paid off, that’s what I’m doing. It still makes sense to take the $265,000 out of there and go pay cash for something because now you have, instead of $65,000 you have $265,000 with which you can go pay cash for something, if that makes sense.

Ron: You’re still way ahead taking your money and moving it somewhere else. Now that that screws up your, that could potentially screw up a 1031 exchange in that you, there are rules to a 1031 exchange, you have to spend more money, right? So when you’re paying cash, you may end up with some what they call boot, which she’d have to pay taxes on still leagues ahead of where you would be if you didn’t take the market gift.

Angela: And with the personal residence example, you know, if I was like, oh, I don’t want to have any debt and I want to pay this off, the, the amount of time that I, you know, got that market gift that it took, what, two, three years for me to make a $100,00 to $150,000, whatever it is, in equity.

Ron: And you did nothing.

Angela: And I did nothing. And the amount of time it takes to pay off your mortgage is, I mean, it takes way longer. I didn’t make hardly a dent on my mortgage in that same, you know, two, three years. So wouldn’t it make more sense even for me if I was trying to get out of debt? It seems like it would make more sense to take the equity out of my home, sell it, and go get in a better position on a similar home, right.

Ron: Right. So, I mean, there’s a ton of different things you can do. You’re only limited by your creativity. But here’s a creative thing you could do. You got $150,000. So let’s say you put, I don’t know what you put into your other house, but let’s say you put $20,000 $30,000 into your other house because you know, you don’t have to put as much down on a FHA loan, right? So now you’ve got some equity in your property. There’s $20,000. So now you’re at $170,000 bucks, right? $170,000 bucks on a, I don’t know house that if you put 20%, whatever the value is, right? I don’t want to tell all your business on our podcast.

Angela: Let’s say it’s worth $450,000 now.

Ron: Whatever you put in the house let’s say you did a sideways slide, okay? So let me make up some numbers. Let’s say your house was $300,000. It went up to $450,000, okay? And you had $20,000 into it. So now you had a $300,000 house, which is what you purchased originally. Now you have nearly half after you pay commissions and everything like that, you’ve probably got about half of what you, the original house cost. So if you’re a, I want to pay my house off kind of person, nothing wrong with that, right? 

Ron: If that’s who you are, and that’s the stage in life that you’re at. It makes sense, like Angela said, to go find a house that you can affect the value of it because it needs some work or you could just get a good deal. It’s going to take you longer to do that. But if you do and you put $50,000 down on it and you can, and you can get in for $300,000, $350,000, 400,000, now you’ve got $100,000 is tax free off the table that then you can go invest, right?

Ron: So there’s one thing you could do, you can take a portion of that money. If you live in the house for two years, which you have done Angela, then all of the gain is tax free and your personal residence, right? So you’re good, well up to a certain amount, which you’re not over.

Angela: Thanks for that Ron, okay.

Ron: So you now have tax free money. So that not only is that a market gift, but it’s a tax free market gift. And you can take that money you can go invest in other properties that are bringing in income for you, which gets you to your income goal for which was what we even started this thing talking about, right? That you want to go higher and at the same time you can start over on another house with which you could make some changes and to the property so that you can increase the value and do it all over again.

Angela: Right. Exactly. And that’s a great idea.

Ron: So if you’re not a person who is in love with your house or even if you are, but your goal is what we were talking about, to get a house paid off that you live in and also to create income. I mean there’s tons of different things you could do. You could, you could take the full $150,000 and put it down on another property or you can put $50,000 down on a property. You could do $50,000 worth of work and put $50,000 in the bank just for rainy day.

Ron: There’s so many things you can do, but you can’t do any of that if you leave a trapped up in your house. And man, there’s so many people out there sitting on huge chunks of free money that they’ve been given and so many of them are going to in a few years, I don’t know how long nobody does just, it’s going to be gone and they’re going to be complaining because they didn’t do anything when the, when the market was up, I’m telling you it’s up. It’s been over 10 years. It’s not going to keep going.

Angela: Yeah. So I could sit here and wait for it to go up further because I’m really greedy like that. No offense to anyone out there that is, you know, waiting, trying to pick the top of the market. I mean, we know we’re close. I mean, yeah, I thought I was there a couple of years ago and that was not accurate. But, you know, trying to wait for the top of the market before you use your equity is a risky, risky gamble that I’m not willing to take personally so.

Ron: I mean, it’s at some point the amount of equity that you have is sufficient for you to go, okay, if someone wrote me a check for that, I’d move.

Angela: Right. What’s your number?

Ron: I had a realtor, this guy, who called me up, the guy who sold me this house that I’m currently living, this house right here, if you can see me on YouTube this home, he called me up and he said, hey man, I’ve got somebody interested in your neighborhood. Now I’ve only been here for a year in this house. Hey, I’ve got somebody interested in your neighborhood, would you be interested in selling at all? And I said, man, for the right price, everything I own is for sale. He laughed. He said, what’s the right price? I told him what the right price was. And he goes, yeah, well, I mean that’s probably not going to happen. I’m like, well then I’m probably not going to move, but…

Angela: But whatever your price is, there is a person.

Ron: Every person listening, you’ve got a number, right? So if your number’s not $150,000 cool, no worries. Stay in your house, that’s fine, but I guarantee you got a number. If the number is out there already on your house and you just haven’t bothered to even look or think through what changes in your life could come because you haven’t done a calculation on return on equity, then you’re silly because it’s going to take another full market cycle for you to get this money back. And if you take it off the table, you could do some really powerful, very cool things with it. And you’re really only limited by your imagination, like we were just talking about it.

Angela: Yeah. And real quick, Ron, I know with my equity for instance, I could also do like a cash out refinance or a home equity loan. And people would do both those, but in those cases I could end up in a worse situation with higher expenses and then lose that equity, right?

Ron: Yes. Well you know, if you get into a home equity line of credit, you have a super low rate. Most of those rates are not fixed. In addition to that, most of those lines of credit they can be cancelled anytime they want. Ask all of the people in California because when everything fell apart and you had an open line of credit with which you could draw on, they just shut them off. So if you had an open line of credit for $400,000 for the entirety of your equity bankable equity in your property and you had $100,000 on it and you were paying on it, you know, no big deal thinking that you would just have $300,000 to draw on anytime you want to. You got to really, really and a lot of the people back then, Angela, they were making the negative cash flow payments on the stupid properties that they bought all over the country.

Ron: They are gambling on the appreciation. They were making those payments from their home equity lines of credit. Then when they shut their line of credit off, they could no longer get the equity out of their property because the equity was gone they were screwed and they lost all of their other properties. So you just have to think through those things. Is now the best time to be doing a home equity line of credit on a floating rate where we’ve had, I mean, rates have been historically low for over a decade? I don’t know if I don’t like Vegas that much. And the reason I don’t is because I don’t like losing money. And so, I mean, if you’re a person who loves Vegas and loves to gamble them and then take your, take your risk, I guess I’m not, I’m not willing to do it.

Angela: No. For me personally, I’d rather get that equity out of the home officially and use it for something that I know is going to…

Ron: I mean, look, if you’re not a, I want to pay off my house kind of person, but you want to do a sideways slide on your payment, you can buy a hell of a lot nicer home. Just put more money down on the hell of a lot nicer home. Keep your payment the same and move up in the world if you want. There’s so many things you can do with that equity and that equity will be gone like that as soon as the market corrects. And then you’ll be going, man, I should’ve taken that $300,000 or that half a million. I should have taken it out. You know, if Jane had dinked around and not taking her equity out of those properties and put it into more cashflow, she wouldn’t be able to live right now without having to work like a dog. And instead she’s financially freed up. She can do whatever she needs to do. Now. She can, she can work when she can do whatever she wants to do. All because she took some action on a market gift. I keep saying that.

Angela: No, no, I was just going to say, yeah, to wrap this up. You know, if you’re one of those, I mean, most of you out there probably got a…

Ron: That was a fantastic pun.

Angela: It is. But most of us probably, actually have a market gift right now and because that’s where the market’s at. So you got to decide if you’re going to take that gift and unwrap it or ignore it and let it, you know go to waste or go away. So it’s totally up to you and we will, we’re done making fun of you for now.

Ron: For now. It will be even worse when we make fun of you after the market corrects and you still didn’t do anything.

Angela: If you haven’t done anything stop listening to our podcasts.

Ron: And I promise, yeah I promise as soon as that happens, we are going to do an episode about all of the people who lost millions and millions and millions of dollars because they didn’t act back when we told them to with their equity. So you’ve been warned.

Angela: You’ve been warned.

Ron: We will make fun of you and it will not be we are not even going to pull the punches then.

Angela: No, no, but we still love you. We still love you.

Ron: Because we only make fun of people that we love.

Angela: Yeah, yeah, exactly. Okay, well on that note, thanks for listening. Hope you enjoyed our talk about equity. If you have any questions on it or comments or you know, love you want to give us, you know, if you’re mad at us, you don’t have to comment the love you want to give us a go, you know, write us a review on iTunes or visit GetRealEstateSuccess.com. Let us know what you think and we’ll see you next time. Thanks Ron. 

Ron: Yup. See you next time.

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